What is this mythical LLC? Tax myths about LLCs debunked!

So if it doesn't change how I file my taxes, why do so many people think LLCs are some kind of tax-saving strategy? I'm guessing a lot of people are taking deductions they shouldn't be taking? Also, would it make sense for me to form an LLC just for the liability protection part then?

Many people confuse LLCs with tax strategies because they don't understand the difference between legal structures and tax classifications. What they're often thinking about are S-Corporations or other tax elections that can sometimes reduce self-employment taxes in certain situations, but those are completely separate decisions from forming an LLC. Regarding liability protection, it might make sense for your woodworking business, especially if customers come to your workspace or your furniture could potentially cause injury. However, you should know that proper insurance (like a good general liability policy) is often more important than an LLC for your type of business. For true protection, you'd need to maintain separate business accounts, get proper insurance, and follow all formalities - simply having an LLC on paper isn't a magic shield.

How accurate is this tool? Does it actually connect to a real tax professional or is it just another AI thing spitting out generic advice? I've been burned before by online "calculators" that ended up being way off.

I'm curious about this too. Did it actually help you decide whether to form an LLC? And did it explain when/if you should elect S-Corp status? That's the part I find most confusing.

It's not just a generic calculator - it analyzes your specific numbers and business type. You input your revenue, expenses, business activities, and it provides personalized guidance based on actual tax code. It correctly identified that for my specific situation, simply being a sole proprietor was fine for now, but that I should consider an S-Corp election (not just an LLC) when my profits consistently exceed $40,000. Yes, it absolutely helped with the S-Corp question! It showed me the exact income threshold where the self-employment tax savings would outweigh the additional costs of S-Corp compliance (extra payroll, more complex filing). What I appreciated was getting the full picture - not just "form an S-Corp and save taxes" but also understanding the compliance costs and exactly when the switch would make financial sense.

Wait, does this actually work? The IRS phone system is literally the worst thing I've ever experienced. I've been trying to ask about my LLC that I filed incorrectly for MONTHS. How exactly does this callback thing work?

Sounds super sketchy. How would some random service get priority access to the IRS? They probably just keep auto-dialing and charge you for the privilege. The IRS doesn't give special access to third parties.

It actually works by continuously calling the IRS for you and navigating their phone tree. It's not "special access" - they're basically just doing the frustrating hold time for you. When they finally get through to an agent, they connect you directly with a call back. I was skeptical too, but I was desperate after spending hours on hold over multiple days. It saved me an entire day of waiting on hold. The IRS agent I spoke with cleared up my LLC confusion in about 10 minutes once I actually got to talk to a human. They don't know you're using a service - you're the one who speaks directly with the IRS agent.

This is so helpful! So basically if I have a single-member LLC, the IRS treats me exactly the same as if I just had a sole proprietorship? What's the advantage of multi-member then? My wife and I are thinking of starting a business together.

That's right - for tax purposes, a single-member LLC is treated exactly like a sole proprietorship. You file Schedule C with your personal return, and the LLC is completely "invisible" to the IRS. For you and your wife, it depends on your state. In community property states, a husband and wife can elect to treat their LLC as a disregarded entity (essentially a sole proprietorship) instead of a partnership, which simplifies filing. In non-community property states, a husband-wife LLC typically files as a partnership, which means a separate tax return (Form 1065) and Schedule K-1s. The partnership route involves more paperwork but can sometimes offer more flexibility in how income and expenses are allocated between owners.

You actually don't need an LLC to deduct legitimate business expenses. You can deduct the business portion of your computer, internet, home office space, and business travel on Schedule C as a sole proprietor. The LLC won't change what you can deduct - you just need to make sure they're ordinary and necessary expenses for your business.