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My husband does handyman work for a rental management company as a sole proprietor. They recently suggested to him he should become an LLC. I can not find any reason that this would be beneficial to him, and in fact, in FL he would actually have a yearly fee to pay. What am I not understanding? Is there any tax benefit when you are a one man show with very little expenses.
I can think of liability, but I assume he carries a large liability policy anyway. But he fixes a stair, someone trips and sues him and the management company. His personal assests are protected as a corporation better.
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Originally Posted by Fr_Chuck
That would make sense, however he subs from the sub contractor in doing little things, like yard work or painting, cleaning, things like that; nothing that even requires an actual occupational license in FL. Insurance would in fact cover any thing that I could foresee as a damage liability. Does an LLC get a 1099 like he does as a sole proprietor? I'm really puzzled as to why they are pushing this.
A single-member LLC is going to be taxed just like a sole proprietor unless you elect to be taxed as a corporation. And yes the LLC would be subject to the 1099 reporting requirement.
Two other advantage of an LLC besides limiting the kind of liabilty that could be covered by insurance:
1. Your husband would no longer be perosnally responsible for the business's debts. So if business goes bad creditors can't come after his personal assets. As the spouse you may sleep better knowing that your house, cars, bank account etc would no longer be at risk.
2, If he ever wants to sell the business it's easier to do so as an LLC than as a sole proprietorship.
As others have noted theer is really no tax advantage. You say the management company has urged him to make the change - what rationale do they give?
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