We are working with a new client that had themselves set-up as an LLC. A Sole LLC!
A Sole LLC is a disregarded entity as far as the IRS is concerned. They are required to file a Schedule C with their personal tax return. This is also an entity type that I am told is the easiest to pierce the corporate veil and thus lose limited liability.
Also all profits are currently subject to self-employment taxes, so there beyond your ordinary effective tax rate you will be taxed at an additional 15.3% rate on the back of your 1040.
When I asked the client why they chose this entity type, they stated that this was the recommendation of someone they knew. Not an attorney. Not a CPA.
So we have reviewed options for them, but for now we need to keep them as a Sole LLC, since it was too late into the year to really consider other options.
So we are working with them to get their books and records in order and will make a decision on how to proceed in 2017.
All early business decisions have consequences. Even the absence of a decision is a decision. SO make sure you are asking questions of those who can appropriately guide you forward towards your goals.