Question

When does it make sense to go from a sole proprietor to LLC or S corp

Forum|Forum|4 years ago
October 27, 2021
1 reply
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I run a private gym studio we have double or business from last year. Currently i am just a sole proprietor.

My gross income will be about 140k this year. My question is i am married filing jointly with 2 kids, when is there a huge tax benefit for me to change to a LLC or S corp to save more money from being taxed? Is there a certain amount of money to reach or when would it be the most optimal to save money on taxes in my situation.

thanks!

carolineb

Good morning! Tax wise, not much of a difference by switching from a sole proprietorship to a single member LLC or S-corp, the benefit would be in the limited liability in the event of a lawsuit. If you create a single member LLC, you can continue to file a Schedule C on your personal return as usual, an S-Corp requires a separate tax return which can get pricy. I am including a link with additional information which may help you to make this decision: Should You Switch Your Side Hustle From A Schedule C Sole Proprietor To An LLC Or Corporation?

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