Best business structure: 2-member LLC vs partnership for airport shuttle service?
My husband and I both work full-time jobs, but he's an amazing driver and absolutely loves taking people to and from the airport. We live in a small vacation town where there's literally no Uber service at all. We're thinking about investing in a hybrid vehicle and starting either a partnership or LLC for this side business. I'm trying to figure out whether we'd be better off as an LLC or just a simple partnership for tax purposes. For context, we're estimating maybe $13k in revenue max during our first year, and it would just be the two of us - no employees or anything. What's the smarter business structure for our situation?
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Amina Toure
From a tax perspective, a 2-member LLC and a partnership are actually treated the same by default. An LLC with multiple members is automatically taxed as a partnership unless you elect otherwise. The main difference is liability protection. With a partnership, you and your husband would have personal liability for business debts and claims. If someone sued your shuttle business, your personal assets could be at risk. With an LLC, your personal assets generally have protection from business liabilities (though there are exceptions). Since you're providing transportation services, I'd recommend the LLC structure for the liability protection alone. The minimal extra cost of forming and maintaining an LLC is worth the protection, especially when transporting people. You'll still file the same tax form (Form 1065) and receive K-1s showing your share of profits/losses that flow through to your personal returns.
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Oliver Zimmermann
•Thanks for the explanation! Quick question - if we go the LLC route, do we need to do anything special tax-wise to maintain that status? And would we be able to deduct the cost of the new hybrid vehicle from our business income?
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Amina Toure
•For tax purposes, you don't need to do anything special to maintain LLC status - that's handled at the state level with annual reports/fees. The IRS automatically treats multi-member LLCs as partnerships unless you file Form 8832 to elect corporate taxation (which probably isn't advantageous in your situation). For the vehicle, yes, you can deduct expenses, but there are specific rules for business vehicles. You can either deduct actual expenses (gas, insurance, maintenance) multiplied by your business use percentage, or use the standard mileage rate (65.5 cents per mile for 2023). If you're buying a new hybrid specifically for this business, you might also qualify for clean vehicle tax credits, though that depends on your specific situation and the vehicle you choose.
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CosmicCommander
After struggling with a similar decision for my side gig last year, I found this amazing tool at https://taxr.ai that helped me compare different business structures. You just upload your financial projections and answer a few questions about your situation, and it breaks down the tax implications for each structure. The best part is it shows you specifically how much you'd pay in self-employment taxes and what deductions you'd qualify for. For my airport shuttle service, it showed me that an LLC taxed as an S-Corp would save me about $3k in self-employment taxes once I hit around $35k in profit. Until then, a simple LLC (taxed as partnership) made more sense. The tool also flagged some vehicle deductions I hadn't considered!
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Natasha Volkova
•That sounds helpful, but does it take into account state-specific requirements? In my state, LLCs have pretty steep annual fees that eat into any tax benefits for small operations.
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Javier Torres
•I'm skeptical of these online tools. How accurate is this compared to just talking to a local CPA who specializes in small businesses?
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CosmicCommander
•Yes, it actually does factor in state-specific requirements! You select your state during setup, and it includes those annual fees in the comparison. For example, it showed me that in California the $800 minimum LLC fee would completely wipe out the tax benefits until I hit a certain income threshold. In my experience, it's very accurate and comparable to what my CPA told me, but much more affordable. That said, I still took the report to my accountant for final confirmation. The tool was actually developed with tax professionals, and it references specific IRS regulations for each recommendation. I found it helpful to use the tool first to understand my options before paying for professional advice.
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Javier Torres
I was genuinely skeptical about using an online tool for business structure advice, but I tried https://taxr.ai and was seriously impressed. Based on the projections for my fishing charter business (similar revenue to what you're expecting), it confirmed an LLC taxed as a partnership made the most sense until I hit about $40K in profit. What really helped was the detailed breakdown of vehicle deductions - it showed me exactly how to maximize the Section 179 deduction for my boat (which works similarly for vehicles) and explained when standard mileage vs. actual expenses made more sense. The liability protection explanation was way clearer than what I found on random websites. Saved me a $300 consultation fee!
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Emma Davis
I tried calling the IRS business hotline for clarity on LLC vs partnership taxation for three weeks straight and could never get through. Finally used https://claimyr.com and got a callback from the IRS in under 30 minutes! You can even watch how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed everything others have said here - a multi-member LLC is taxed as a partnership by default. But they also mentioned that with your expected revenue, you should look into the qualified business income deduction (Section 199A) which could give you a 20% deduction on your business income regardless of which structure you choose. Worth checking out.
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Malik Johnson
•Wow really? How much does this service cost? I've been on hold with the IRS for literally hours trying to figure out how to handle my Etsy business taxes.
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Isabella Ferreira
•This sounds too good to be true. The IRS never calls back that quickly. Did you actually get useful information or just general advice you could find online?
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Emma Davis
•The service itself is very affordable - I considered it worth every penny just to avoid the frustration of being on endless hold. They only charge if they successfully get the IRS to call you back. I actually got really specific information that addressed my exact situation. The IRS agent walked me through the tax implications of different business structures based on my specific income level and state. She also explained exactly how vehicle deductions work when you're using a personal vehicle partly for business - including the documentation I need to keep to avoid audit issues. Definitely way more personalized than what I found online, and I had the chance to ask follow-up questions in real time.
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Isabella Ferreira
I was totally skeptical about Claimyr (sorry for doubting!), but I was desperate after trying to get through to the IRS for weeks about my business structure. Used the service yesterday, and I got a call back from an IRS agent in 22 minutes! The agent was super helpful and walked me through the exact requirements for my situation. What surprised me most was how much misinformation I'd read online about LLC taxation. The agent clarified that my state's LLC annual fee IS deductible on my Schedule C (some blogs said it wasn't), and that my specific situation qualified for simplified vehicle expense reporting. Worth every penny just to get definitive answers straight from the source instead of guessing.
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Ravi Sharma
Just wanted to add my two cents as someone who's been running a small town transportation business for 3 years. Go with the LLC 100%. I started as a partnership and switched after a passenger threatened to sue when they tripped getting out of my car (nothing came of it, but scared me straight). The tax filing is identical either way (Form 1065), but the peace of mind knowing my house isn't on the line is worth the $100 annual fee my state charges. Also, banks and insurance companies took me more seriously as an LLC - got better rates on commercial insurance too.
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Paolo Ricci
•That's really helpful to hear from someone who's already doing something similar! Did you find it complicated to switch from partnership to LLC after you'd already started? I'm worried about setting up something and then having to change it later.
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Ravi Sharma
•It wasn't too bad switching from partnership to LLC, but definitely created some extra paperwork I could have avoided by starting with the LLC. I had to formally dissolve the partnership, file new paperwork for the LLC, get a new EIN, open new business bank accounts, and update all my insurance policies and client contracts. The whole process took about a month and cost around $500 including state fees and having my accountant update everything. Would have been much simpler to just start with the LLC from day one. The annual maintenance is super easy though - just a simple form and fee in my state. Your state might be different, so check your secretary of state's website for the specific requirements.
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NebulaNomad
Has anyone used QuickBooks Self-Employed for a small driving service like this? Trying to figure out if it's worth the subscription vs just using spreadsheets for tracking mileage and expenses.
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Freya Thomsen
•I use it for my handyman business and it's great for tracking mileage automatically. The app uses GPS to track your trips and you just swipe business vs personal. At the end of the year it calculates all your mileage deductions automatically. Definitely worth it if you're driving a lot for business.
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