Creating an LLC for a side gig/hobby - TAX implications

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Pitagoras
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Creating an LLC for a side gig/hobby - TAX implications

Post by Pitagoras »

I won't quit my job, but I started to sell some of my woodworking crafts and plan to attend to craft fairs. So far I sold on line via Etsy, which takes care of sales tax and get's me a tax form at the end of the year. But now on a booth I need to consider first how to charge (got a Square account already), and then what to do with the sales tax...but I figure out I ask that question to the organizers.

BUT, what worries me most, if the liability. I read that it is very wise to open an LLC (as an S corp), and get an insurance. In my state, the LLC costs about 300 bucks a year, willing to pay that (I did about 4k this year), but the question is...TAX implications.

I do my taxes myself, it is very easy using Turbo Tax, importing the forms, etc., does anyone know what the LLC will bring with it? Or is it just a form that I will need to fill out with the yearly income and that's it?

Thanks
HomeStretch
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by HomeStretch »

A S-Corp has its own Federal, state and (possibly) local filing requirements - income tax returns, sales tax returns, payroll tax returns, annual report, etc. You will need to run payroll yourself or hire a third-party payroll provider to pay yourself, make self-employed retirement contributions, make timely tax deposits, issue a W-2 to you and, if applicable, 1099s to vendors, etc.

The simplest, least costly structure would be a LLC (state) and sole proprietorship (Federal). But you would need a way (via insurance, etc.) to adequately protect yourself financially as a sole proprietor for any business or other liability.

Consider consulting expert advisors (legal, tax, insurance) to determine if you can structure an insured sole proprietorship in a manner where you have sufficient liability and other protections. If not, they can advise how to best structure your business.
tibbitts
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by tibbitts »

I'm not an expert but my understanding is that an LLC is ignored from a tax standpoint; you may be able to elect to have the income treated as self-employment, partnership, or corporate income.

You'll need to file to pay sales taxes, and the percentages will be specific to each location of the craft fairs, based on county/city additions to state sales taxes (assuming there are sales taxes that apply.)

I wouldn't count on an LLC for liability protection, despite the name.
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Pitagoras
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by Pitagoras »

Thanks, I understood the LLC can be S or C corp...I am not but I guess I misunderstood. It is an LLC as sole proprietorship.

Thanks for your comments, will keep reading.
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Pitagoras
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by Pitagoras »

tibbitts wrote: Mon Oct 25, 2021 3:04 pm
I wouldn't count on an LLC for liability protection, despite the name.
Why not? That would be actually the whole point...thanks.
HomeStretch
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by HomeStretch »

If you are going to have a booth at a craft fair, you are likely going to need insurance on top of whatever business structure you decide on. The booth can fall on someone or some thing, someone can trip over your power cord, etc. Even just selling on the Internet, you can have product liability.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by Lee_WSP »

Pitagoras wrote: Mon Oct 25, 2021 3:24 pm Thanks, I understood the LLC can be S or C corp...I am not but I guess I misunderstood. It is an LLC as sole proprietorship.

Thanks for your comments, will keep reading.
An LLC is a pass through entity, but you may opt for S Corp taxation by filling a form.

There's really no difference as far as taxes go so long as you don't opt for S Corp taxation. Everything goes on schedule C.
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ResearchMed
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by ResearchMed »

Pitagoras wrote: Mon Oct 25, 2021 3:25 pm
tibbitts wrote: Mon Oct 25, 2021 3:04 pm
I wouldn't count on an LLC for liability protection, despite the name.
Why not? That would be actually the whole point...thanks.
An LLC won't work to keep you and the business separate when you ARE the work.

If you own a car wash and use an LLC and you aren't on site (to make this easier), then if you set up the docs and registration of the LLC and have LLC business insurance, that's the kind of situation where an LLC can help. IF the car wash damages a car or, worse, injures someone, then suing the LLC makes sense, and it would be much more difficult to sue you personally.

But consider a situation where you are hand-washing the cars. You could form an LLC, but it will be very difficult if there is damage/injury for you to claim it was "only the business" and you - the person - had nothing to do with it.

So if you were ordering hobby items made elsewhere and reselling them, an LLC may help.
But if YOU are making the items, or performing the service yourself, then... the LLC won't protect you from liability.

What you need when "you" are the business or are involved directly is business/commercial insurance to cover you if you get sued.

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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by tibbitts »

Pitagoras wrote: Mon Oct 25, 2021 3:25 pm
tibbitts wrote: Mon Oct 25, 2021 3:04 pm
I wouldn't count on an LLC for liability protection, despite the name.
Why not? That would be actually the whole point...thanks.
IANAL but my understanding is that given the business you describe, you'd have to be very careful in operating the LLC so that the LLC doesn't appear to be just an extension of you. You might look at Nolo or some other resources for suggestions.
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Pitagoras
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by Pitagoras »

ResearchMed wrote: Mon Oct 25, 2021 3:42 pm
What you need when "you" are the business or are involved directly is business/commercial insurance to cover you if you get sued.

RM
So an LLC would not add any benefit, if I could just take a liability insurance....No, I do the stuff with my own hands...
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by RubyTuesday »

IANAL…

Schedule C and business liability insurance.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by Lee_WSP »

Pitagoras wrote: Mon Oct 25, 2021 4:18 pm
ResearchMed wrote: Mon Oct 25, 2021 3:42 pm
What you need when "you" are the business or are involved directly is business/commercial insurance to cover you if you get sued.

RM
So an LLC would not add any benefit, if I could just take a liability insurance....No, I do the stuff with my own hands...
You want both general liability insurance and product liability insurance. Neither is particularly inexpensive, but it is far better to have it and not need it than the alternative. Try and find a company that will offer you both. Sometimes there are guilds you can join to get pooled insurance rates.

If you can't afford both, get the product liability insurance and buy the general insurance on a temporary basis for each craft fair.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by dukeblue219 »

Pitagoras wrote: Mon Oct 25, 2021 2:32 pmBut now on a booth I need to consider first how to charge (got a Square account already), and then what to do with the sales tax...but I figure out I ask that question to the organizers.
They may have some advice to offer, but they may just shrug and say they don't know. You need to start with your state's resources for new business owners. Quite likely they will have a ton of information designed to help people like you collect and remit sales tax.
Pitagoras wrote: Mon Oct 25, 2021 2:32 pm I do my taxes myself, it is very easy using Turbo Tax, importing the forms, etc., does anyone know what the LLC will bring with it? Or is it just a form that I will need to fill out with the yearly income and that's it?

Thanks
It's extremely easy to file as a sole proprietor through TurboTax. You probably don't even need the "business" version if you have a straightforward situation.

Your state may also require an annual report or property tax return as well. These can be very basic if you aren't depreciating a ton of property, but may have filing fees for LLCs.

Finally, check if your jurisdiction requires a business license for your line of work or prior to selling at a booth.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by hachiko »

I disagree with the claims that an LLC doesn't provide some liability protection, as long as it's operated correctly. The issues people are mentioning generally apply when you are selling services, and generally, professional services.

That said, I agree you may need insurance.

Questions:
1) What is it that you're selling?
2) What state are you located in?
3) Do you sell at trade shows (physically) in other states?
4) Any plans to sell the business?
5) Do you get any benefit from setting up an LLC? For example, will some trade shows only let entities rent spaces, are customers more likely to buy from you if you're operating through an LLC, etc.

For federal income tax purposes, an LLC means nothing, unless you elect a different tax treatment. That applies for state income taxes in most states as well. And it's almost certainly not worth the compliance cost to elect S-Corp status on $4k in annual revenue. So when you're deciding whether to setup an LLC, the legal side is going to be the driver.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by alfaspider »

A lot of misunderstanding about what an LLC is for tax purposes. An LLC can be treated as a disregarded entity (a sole proprietorship as far as an individual is concerned), a partnership, an S-corporation, or a C-corporation.

A single member LLC will default to disregarded status, but you may have reason to elect otherwise depending on what you are trying to do. Always a good idea to get legal and tax advice (not forum advice) before you move forward on the creation of any business entity so you know you are actually getting what you want.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by tibbitts »

alfaspider wrote: Mon Oct 25, 2021 7:17 pm A lot of misunderstanding about what an LLC is for tax purposes. An LLC can be treated as a disregarded entity (a sole proprietorship as far as an individual is concerned), a partnership, an S-corporation, or a C-corporation.

A single member LLC will default to disregarded status, but you may have reason to elect otherwise depending on what you are trying to do. Always a good idea to get legal and tax advice (not forum advice) before you move forward on the creation of any business entity so you know you are actually getting what you want.
Although I agree in theory, it doesn't take much in the way of seeking legal and tax advice (and whatever other professional services) before it's just not worth it for a tiny business that you want to remain a tiny business. Maybe just do whatever you want as a hobby and give stuff away when you feel like it.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by TheCowbell »

My reasoning for getting an LLC was for my side gig was mostly for the professional perception. I send invoices to be paid to "Business Name LLC" vs "John Smith". I assume there's some modicum of legal protection but let's be real if a good lawyer was motivated very few small side-gig type LLCs would slow him down.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by ZWorkLess »

I rely on our CPA for tax stuff, but we own both an LLC and an s-Corp (two entities.) Both work as pass through tax-wise.

Having an LLC is cheap and easy. I actually opened a second one fir a few years to hold a single investment property. Easy peasey. Our s-Corp is a (much) bigger deal in all regards.

I’ve never operated a sole proprietorship, so I’m not sure how they work, but my rough understanding of the benefits of the LLC are that we can deduct expenses, have some liability protection (but carry massive amounts of insurance anyway), and with the 2017 tax changes, we now get a 20% discount tax rate m the pass through income from both pass through entities. Downsides are filing another tax return (not really required for LLC but cleaner) and varying by state, small to modest annual business license fees plus a quick annual form for said license.

If I were you, I’d figure out if you gain any of those benefits by forming the llc or if you’d see any of those downsides. And of course add in any other pros/cons I am not aware of or thinking of. Then decide…
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by iamfarmerted »

No need to do an S Corp. A simple single member disregarded entity LLC that you’ll do a schedule C for an add to you personal returns. Once registered with your Secretary of State you’ll want a biz bank account and insurance.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by cchrissyy »

ZWorkLess wrote: Mon Oct 25, 2021 10:12 pm Having an LLC is cheap and easy.
Sorry but this is a good illustration of why we should be careful with advice online. The OP says their state costs $300 to register an LLC, and their revenue is only $4000. If the OP were in California, an LLC is $800 and you pay that fee every year even if you have no profits. I wouldn't call that "cheap".
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by cchrissyy »

Pitagoras wrote: Mon Oct 25, 2021 2:32 pm BUT, what worries me most, if the liability. I read that it is very wise to open an LLC (as an S corp), and get an insurance.
I think the type of coverage you are referring to is business liability (for when your display tent falls on your employee while setting it up, or a customer trips on your power cord) and product liability (for when a toddler chokes on one of your woodworking parts at home). If you deal with a commercial insurer you might also receive business interruption insurance (for when you're forced to close due to some outside event like a weather disaster) and property coverage (for if your stockroom and computers are robbed).

I imagine all the above will be expensive relative to your current sales, but, inexpensive relative to bigger retailers and manufacturers. All of them are important in their own way, and I would recommend doing them as a sole proprietor much faster than i would recommend having an LLC.

If you mean to keep this business at the hobby level, then you probably don't need all these kinds of coverage but i would really worry about the product liability angle.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by 5outof10 »

When one person forms an LLC the IRS's tax treatment of the LLC defaults to a disregarded entity/sole proprietorship. When 2 or more owners form an LLC the IRS will default the LLC to be taxed as a partnership. The owners don't have to do anything to elect these statuses. Either LLC (single-member or multi-member) can elect to be taxed as an s-corp or as a c-corp. There are strict tax rules to abide by under each tax status. This is the point where you consult your accountant.

The LLC legal entity structure offers its members/owners limited liability protection. That is, it can shield the members'/owners' personal assets from certain actions of the LLC, it's employees, and it's other members/owners, including your own actions on behalf of the LLC. That said, some plaintiffs may be able to break through the limited liability shield and get to the personal assets of the members/owners. This is refered to, in most states, as "piercing the corporate veil" (historically, as LLCs borrow the limited liability protection
concept from it's elder statesman the corporate entity) or more aptly "piercing the limited liability veil". To pierce (and get to a member's/owner's personal assets) the plaintiff must prove specific elements or factors (look up those legal terms). These elements or factors are EXTREMELY state specific and make or break the argument as to whether an LLC would shield your personal assets from a lawsuit against work you completed on behalf of your LLC. This is where you consult your lawyer.

Insurance products are quite easily adaptable. They are less rigid than IRS rules, state taxing authority rules, and legal structure laws. Policies can be purchased by individuals or LLCs, and the use of additional insureds and loss payee can further make things work. This is where you consult your insurance agent.

Insurance's adaptability is why you determine your course of action by consulting the professionals as I have laid out: accountant first, then lawyer, then insurance agent. If you get to needing to consult a lender then you stop and consult your mentors and your spouse.

FWIW, an LLC with insurance might make a ton of sense for you. It would be terrible if a lawsuit regarding your financial-light hobby cost you to lose all your personal assets.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by 5outof10 »

When one person forms an LLC the IRS's tax treatment of the LLC defaults to a disregarded entity/sole proprietorship. When 2 or more owners form an LLC the IRS will default the LLC to be taxed as a partnership. The owners don't have to do anything to elect these statuses. Either LLC (single-member or multi-member) can elect to be taxed as an s-corp or as a c-corp. There are strict tax rules to abide by under each tax status. This is the point where you consult your accountant.

The LLC legal entity structure offers its members/owners limited liability protection. That is, it can shield the members'/owners' personal assets from certain actions of the LLC, it's employees, and it's other members/owners, including your own actions on behalf of the LLC. That said, some plaintiffs may be able to break through the limited liability shield and get to the personal assets of the members/owners. This is refered to, in most states, as "piercing the corporate veil" (historically, as LLCs borrow the limited liability protection
concept from it's elder statesman the corporate entity) or more aptly "piercing the limited liability veil". To pierce (and get to a member's/owner's personal assets) the plaintiff must prove specific elements or factors (look up those legal terms). These elements or factors are EXTREMELY state specific and make or break the argument as to whether an LLC would shield your personal assets from a lawsuit against work you completed on behalf of your LLC. This is where you consult your lawyer.

Insurance products are quite easily adaptable. They are less rigid than IRS rules, state taxing authority rules, and legal structure laws. Policies can be purchased by individuals or LLCs, and the use of additional insureds and loss payee can further make things work. This is where you consult your insurance agent.

Insurance's adaptability is why you determine your course of action by consulting the professionals as I have laid out: accountant first, then lawyer, then insurance agent. If you get to needing to consult a lender then you stop and consult your mentors and your spouse.

FWIW, an LLC with insurance might make a ton of sense for you. It would be terrible if a lawsuit regarding your financial-light hobby cost you to lose all your personal assets.
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Pitagoras
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by Pitagoras »

Thanks all for your input, lot of information to digest.

This is JUST a hobby, and I am not doing it for the money, I am doing it for fun. So really, I do not want to get into complexity taking the fun part away, but I also do not want to loose any of my assets/savings if something gets wrong. The products I sell are really far from being dangerous (cutting boards, vases, bowls, etc.), unless someone eats a cutting board and sues me due to indigestion.

I heard many fellow woodworkers, some more serious about it, create an LLC to shield their personal assets. And others just take out an insurance.

Putting this on a clean sheet:

1. I will anyway need an insurance, with or without LLC
2. LLC could eventually shield my assets, but not 100% bullet proof.

Thanks.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by Pitagoras »

hachiko wrote: Mon Oct 25, 2021 6:47 pm
Questions:
1) What is it that you're selling?
2) What state are you located in?
3) Do you sell at trade shows (physically) in other states?
4) Any plans to sell the business?
5) Do you get any benefit from setting up an LLC? For example, will some trade shows only let entities rent spaces, are customers more likely to buy from you if you're operating through an LLC, etc.
1) Cutting boards mostly, but also vases made out of wood.
2) Tennessee
3) No, I never sold yet and I plan only to show up to one close to my home. Just for fun, hoping selling something to justify new toys...ehem...I mean tools
4) Not at all
5) I am not aware of any.

Thanks
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by WAROB »

For a business your size I would start with just purchasing some business insurance and go from there. You already file a schedule c for the business and that wouldn’t change if you start an LLC. I wouldn’t start an S-Corp for an entity of your size.

Consult your state for sales tax as you most likely need to register with them and file a return on a regular basis to remit your sales tax collected.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by tibbitts »

You might consider outsourcing the sales to somebody who already sells at craft fairs or wherever you want to sell. That won't necessarily solve the liability issue but would be a lot simpler and leave you more time for your hobby.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by cchrissyy »

tibbitts wrote: Tue Oct 26, 2021 10:33 am You might consider outsourcing the sales to somebody who already sells at craft fairs or wherever you want to sell. That won't necessarily solve the liability issue but would be a lot simpler and leave you more time for your hobby.
excellent idea
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by humblecoder »

Others have commented on the pros and cons of an LLC, whether it would truly shield your personal assets, etc, so I won't comment on that further.

However, you mentioned both in the title of the thread and in several postings that you consider this to be a hobby. Be very careful. The IRS has a specific distinction between a hobby and a business (https://www.irs.gov/newsroom/earning-si ... a-business)

Here are nine things taxpayer must consider when determining if an activity is a hobby or a business:
Whether the activity is carried out in a businesslike manner and the taxpayer maintains complete and accurate books and records.
Whether the time and effort the taxpayer puts into the activity show they intend to make it profitable.
Whether they depend on income from the activity for their livelihood.
Whether any losses are due to circumstances beyond the taxpayer's control or are normal for the startup phase of their type of business.
Whether they change methods of operation to improve profitability.
Whether the taxpayer and their advisors have the knowledge needed to carry out the activity as a successful business.
Whether the taxpayer was successful in making a profit in similar activities in the past.
Whether the activity makes a profit in some years and how much profit it makes.
Whether the taxpayers can expect to make a future profit from the appreciation of the assets used in the activity.


Why is this distinction important? Because the IRS will not let you deduct any hobby losses from your income, unlike a business where you can use business losses to offset other income.

I know this wasn't part of your original question, but I just wanted to point this out in case you weren't aware.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by Lee_WSP »

humblecoder wrote: Tue Oct 26, 2021 11:23 am
Why is this distinction important? Because the IRS will not let you deduct any hobby losses from your income, unlike a business where you can use business losses to offset other income.

I know this wasn't part of your original question, but I just wanted to point this out in case you weren't aware.
https://www.irs.gov/pub/irs-utl/irc183a ... profit.pdf

This publication is more thorough and outlines the code 183 safe harbor of 3/5 years profitability.
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ResearchMed
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by ResearchMed »

If you want a nicer "business name", that can be done without an LLC,

You could have "Rumpelstiltskin's Woodworking" instead of "Rumpelstiltskin's Woodworking, LLC" or something without a name at all, etc.

RM
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by HomeStretch »

Pitagoras wrote: Tue Oct 26, 2021 9:53 am … The products I sell are really far from being dangerous (cutting boards, vases, bowls, etc.), unless someone eats a cutting board and sues me due to indigestion. …
Adequate insurance is important. Don’t underestimate your potential need for adequate product liability coverage for a product you are selling and adequate general liability coverage because it is a low-paying hobby.

The nature of product liability claims might surprise you.
Claims can cover accidents involving your product or by unintended uses of your products. For example, someone could chop a finger off while using your cutting board that splits during cutting. Or a piece of wood splinters off and a toddler swallows the piece. Or a toddler gnaws on a piece and has a reaction to any stain or sealer used. Etc.

Some companies/insurers pay a nuisance value for certain claims even if the manufacturer (you) believes it doesn’t have merit. If you have to go to court for a claim, you might have defense costs that aren’t recoverable.

Same with general liability claims. I gave some examples in my first post. Stupidity/not paying attention by the injured person doesn’t necessarily get you off the hook legally for a claim.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by Lee_WSP »

Getting a base less lawsuit dismissed costs tens of thousands.

Plaintiffs attorneys target everyone. Google ADA website lawsuits.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by ZWorkLess »

cchrissyy wrote: Mon Oct 25, 2021 10:22 pm
ZWorkLess wrote: Mon Oct 25, 2021 10:12 pm Having an LLC is cheap and easy.
Sorry but this is a good illustration of why we should be careful with advice online. The OP says their state costs $300 to register an LLC, and their revenue is only $4000. If the OP were in California, an LLC is $800 and you pay that fee every year even if you have no profits. I wouldn't call that "cheap".
Yoikes. You're right. I have no idea what the costs are in any of the 50 states. Presumably, the OP would find those things out for their state before actually forming the LLC. I've only formed LLCs in two states (WV and AL), and they were both cheap and easy -- essentially pocket change relative to the hassles and expenses of the S-corp we have. I would still guess that the S-Corp would be pricier, as that's definitely been our experience. But, who knows, definitely not me. Internet chatter is just that -- internet chatter. It's a way to get ideas and things to investigate. No one should make significant decisions based on internet chatter!
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by Lee_WSP »

Some municipalities are a one time fee and they publish for you, so there is no upkeep. There's very little downside to creating LLC's willy nilly.

Opting for S-Corp taxation on the other hand will incur the added hassle and expense (of at least time) of filing an 1120-S in addition to one's personal 1040.
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by StevieG72 »

My opinion is that an LLC will be of little benefit for your side gig. Read up on what benefits a LLC will provide and when one is recommended.

As far as taxes are concerned, it is NBD, you may need TurboTax Business.

I own a S-Corp but incorporated to save on taxes, not liability protection. I have insurance to cover the liabilities.

Do you have an Umbrella Policy? It may be worth checking if it covers your hobby/side gig. I am guessing it would not, but doesn’t hurt to check. It will not cover an LLC business. A small business policy would be inexpensive and probably the best way to protect yourself.
Last edited by StevieG72 on Sun Oct 31, 2021 4:08 am, edited 1 time in total.
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tibbitts
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by tibbitts »

StevieG72 wrote: Fri Oct 29, 2021 5:25 pm A small business policy would be inexpensive and probably the best way to protect yourself.
I'm not sure... the practical expense threshold for "too expensive" for a business only grossing a few thousand dollar a year isn't very high.
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Lee_WSP
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by Lee_WSP »

tibbitts wrote: Sat Oct 30, 2021 2:44 pm
StevieG72 wrote: Fri Oct 29, 2021 5:25 pm A small business policy would be inexpensive and probably the best way to protect yourself.
I'm not sure... the practical expense threshold for "too expensive" for a business only grossing a few thousand dollar a year isn't very high.
Insurance is never too expensive, it’s practically essential so long as the owner has any assets worth protecting. I’ll flip the statement around and say that at some point it’s too cost prohibitive to be “in business”.
tibbitts
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Re: Creating an LLC for a side gig/hobby - TAX implications

Post by tibbitts »

Lee_WSP wrote: Sat Oct 30, 2021 3:01 pm
tibbitts wrote: Sat Oct 30, 2021 2:44 pm
StevieG72 wrote: Fri Oct 29, 2021 5:25 pm A small business policy would be inexpensive and probably the best way to protect yourself.
I'm not sure... the practical expense threshold for "too expensive" for a business only grossing a few thousand dollar a year isn't very high.
Insurance is never too expensive, it’s practically essential so long as the owner has any assets worth protecting. I’ll flip the statement around and say that at some point it’s too cost prohibitive to be “in business”.
Yes, exactly: the OP needs to evaluate all the costs and decide if it's worth doing this as a business vs. a hobby.
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