How to become an Incorporated Business?
I'm about to begin working as a freelance journalist. Since I'll be working for myself (finding my own customers, acting alone, without business associates, and not with an organization or hospital or anything), I'm curious about the tax implications. I'm aware that I need to meet with an accountant, but I'm attempting to gain a clear understanding about how the process functions before contacting one. Trying to learn the fundamentals of sole proprietorship, incorporation, and limited liability companies. I've done some reading on the topic, but I'm still perplexed. Given that I'm just starting out, maybe I can start tiny and then integrate until I gain more clients? I have no idea why I need some.There is no distinction between the various bodies in terms of taxation. There are several advantages of incorporating over becoming a single proprietorship, but there are few.
The primary benefit is responsibility. By establishing a different legal agency with company properties, you may better protect your personal assets from creditors and litigation. No split, though, would shield you from incompetence and theft.
Additionally, the IRS considers an LLC to be a "disregarded entity." This suggests that the IRS lacks a blueprint for it. You, the owner (what the IRS refers to as a "shareholder" of an LLC), choose how the IRS would handle you: as a sole proprietor, a company (if there are more than one members), or a business (either standard or sub-S).
Nota bene: LLCs, including companies, are subject to annual registration penalties. In Massachusetts, the fee is $500 a year. Additionally, if you elect to incorporate, you must incur the state corporate excise tax of $456.
For you, I'd consider exploring the possibility of forming an LLC to protect your properties and then filing as a sole proprietor. The additional cost in a company is certainly not justified.
Oh, and you will be able to manage payroll as a company. And, you can pay yourself. As a result, you'd incur further costs for unemployment benefits and worker's compensation insurance.