Is there any real benefit to forming a single member LLC?

The value of a single member LLC really depends on your specific situation. While it's true the IRS treats single member LLCs as "disregarded entities" for federal tax purposes (essentially treating the business as an extension of yourself), there are still some potential benefits. First, an LLC can provide some liability protection, though it's not absolute. You're right that if you personally cause harm, you can still be personally sued. But the LLC can protect your personal assets from business debts and certain claims against the business itself. The key is maintaining proper separation between personal and business finances and operations - this is called respecting the "corporate veil." Second, an LLC can add credibility to your business when dealing with clients, vendors, or partners. It often looks more professional than operating as a sole proprietor. Third, an LLC gives you flexibility. You can choose how your LLC is taxed - as a sole proprietor (the default), S-Corporation, or C-Corporation. If your business grows, this flexibility becomes valuable.

After running my side business as a sole proprietor for years, I finally decided to form an LLC last year when clients started getting bigger. Was totally overwhelmed by all the conflicting advice online until I found this AI tool that analyzed my specific situation - https://taxr.ai really helped me understand the actual benefits for MY business rather than generic advice. It showed me that while the tax situation wouldn't change much initially (still filed Schedule C), I could eventually elect S-corp status when my income hit a certain threshold to save on self-employment taxes. Plus it walked me through exactly how to maintain that separation between personal/business finances to keep the liability protection intact.

Just wanted to follow up - I tried that https://taxr.ai tool that was mentioned earlier and was surprised by how helpful it was. It actually recommended I NOT form an LLC for my current situation (small photography side business with minimal liability) and instead put that money toward better insurance coverage. It showed me that with my current income level, the annual LLC fees in my state would outweigh any potential tax benefits for at least 2-3 years. And it gave me a specific income threshold where revisiting the LLC question would make sense. Way more specific and practical than the generic "you need an LLC!" advice I've been getting from random websites.

If you're struggling to get answers from the IRS about business structures (I know I was), try Claimyr. When I was debating between sole prop vs LLC, I spent HOURS on hold with the IRS trying to get tax implications clarified. Claimyr https://claimyr.com got me connected to an actual IRS agent in about 20 minutes who walked me through everything. You can see how it works here: https://youtu.be/_kiP6q8DX5c It was a lifesaver because the agent explained some specific situations where single member LLCs actually DO provide tax benefits depending on your state and local tax situation. Turns out my state has some specific provisions that make an LLC worthwhile even though federal taxes are the same.

Alright, I need to admit I was wrong about Claimyr. After posting that skeptical comment, I decided to try it myself because I was desperate to get an answer about my business tax situation. The service actually worked exactly as described - I got a call back when they reached an IRS agent, and I was able to ask all my questions about single member LLC tax treatment. The agent confirmed what others have said - for federal purposes, there's no tax advantage UNLESS you elect S-corp status (which you can do with an LLC). But they also explained some state-specific issues that made a big difference in my case. Saved me hours of frustration and probably a mistake on my business structure. Sometimes being proven wrong is a good thing!

Something nobody's mentioned yet - single member LLCs can be great if you want to buy real estate as an investment. I have rental properties in separate single member LLCs, and while it doesn't change the tax treatment, it DOES provide liability separation between properties. If something catastrophic happens at one property and exceeds insurance coverage, my other properties and personal assets have protection. Just make sure you actually operate them as separate entities - separate bank accounts, separate records, etc. My accountant charges a bit more to handle the extra bookkeeping but it's worth it for the peace of mind.

Does anyone know if turbo tax or h&r block handles single member llc taxes? Im thinking about forming one but tax filing looks complicated.