People who do independent contractor work

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Quick question. 

I am currently speaking with a few CPAs about which I want to work with in terms of setting up a LLC with S-Corp or PLLC possibly... 

Curious if people get seperate bank accounts for there 1099 work (assuming W2 income as well).  I was thinking of setting up a separate cash management account with TD Ameritrade or Vanguard to manage the income, maybe setting up a separate account to put money aside for taxes and then setup a SEP IRA in the same institution. 

Thoughts?

 

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I have chosen to have a separate checking account at a different bank for all my IC work. That way, I can audit my taxes by totaling my deposits compared to all my other IC income records. I also use that specific checking account for IC expense payouts. I have separate CC for IC related expenses.
For personal expenses, I still use my main account.
In my case, I can have over 50 different payers .. that many unrelated clients even tho a few are repeat clients with either PayPal or DD method of paying me.
My thinking however idealistic is if the IRS comes knocking, I can point them at the dedicated bank and keep my regular activities out of their radar since the most likely Target in my life is my IC status vs being employed argument the IRS has in my industry.

Ask your clients to simply go into the bathroom and discreetly leave your payment on top of the sink with "GIFT" clearly written on the envelope.

I set up a business checking account at my regular retail bank (resulting in a waiver of personal checking monthly fees btw) under the name and TIN of my LLC. I think it is prudent to isolate business income in its own account, but I saw no reason to isolate business / personal income in separate institutions. I believe most IRA custodians and brokers support ACH transfers from just about anywhere, as it makes it easier for them to collect assets. I don't believe I've written a check to a financial institution in decades.

Thanks for responses

My bank does offer a SEP IRA but only as a vehicle to save into a savings or CD account (Ally). I would like to have my SEP IRA in a financial institution where I could invest it. I guess I could easily enough transfer it there with each paycheck that comes in. I've got 2 different checking accounts and several savings account already with Ally (2 for us and 2 for our children). Just afraid 2 more will make it a mess.

I should have added that I have my investments at Fidelity Investments. They are ACH friendly both ways. I am not about to put an IRA of any variety at a bank / CU. Neither  of my banks nor Fidelity charge a fee for any ACH activity that I do. All my ACH action is done at Fidelity.
YMMV by the bank you have. Both of my banks will charge a $3.00 for each outbound ACH. They are glad to do ACH inbound (deposit) for no charge when I need to pull profits from my business account to my regular bank account.
Be cautious setting up a SEP.  In the event you get any employees, SEP will make you cover them.  Talk to your financial advisor or brokerage before setting anything up.

IRS SEP IRA guidelines
 

JW10 said:   I should have added that I have my investments at Fidelity Investments. They are ACH friendly both ways. I am not about to put an IRA of any variety at a bank / CU. Neither  of my banks nor Fidelity charge a fee for any ACH activity that I do. All my ACH action is done at Fidelity.
YMMV by the bank you have. Both of my banks will charge a $3.00 for each outbound ACH. They are glad to do ACH inbound (deposit) for no charge when I need to pull profits from my business account to my regular bank account.
Be cautious setting up a SEP.  In the event you get any employees, SEP will make you cover them.  Talk to your financial advisor or brokerage before setting anything up.

IRS SEP IRA guidelines 

  
Thanks.  This won't be a situation where I get employees.  Its side work in my chosen profession, so I'll be hired as an independent contractor.  So I'll have a 401k/TSP with my W2 employer, if not I would have considered a solo 401k (but it seems like it won't be worth the effort compared to the SEP IRA).  I'll have to talk with the CPA about how to set up the LLC/PLLC/S-corp stuff.  Not sure how much income yet to be expecting from this work on the side.  But how to minimize over paying some taxes related to the self employment tax (i.e. my W2 income will meet my SS needs, but will still have the medicare stuff to deal with and I guess the employer side of the SS contributions and my federal and state income taxes). 

I am looking at TD Ameritrade more because we have our other accounts with them being managed at this time by our financial advisor.   So can make decision on bank account then for a checking and savings account for the 1099 work, and prob do a SEP IRA over at TD. 

 

Why are you forming an LLC? Are you in business in an area that likes to get sued?

Obviously if you have an LLC it needs to be separate, finance-wise. Otherwise there is no LLC at all.

But if it wasn't for the LLC plans, I'd co-mingle. Yes everyone says NOT to do that. But think about it: If you decide to open an auto repair shop in October, now you can go back clear to January and pick out stuff. Whereas if you have this silly bank account separation, you're pretty much limited to October onward. Who wants that?

I can't count the number of times I've filed a schedule C for businesses that I was not aware of when the year was fresh. Much better to do this stuff after the fact. Something like that. Auditors may contact me here at FW.

Yes, my field of work is litigious ... So that hopefully an LLC will at least protect my family. 

Don't get too excited about limited liability. A court can "pierce the corporate veil", making the LLC member(s) personally liable for the entity's debts. I mainly like LLCs because they give the entity an air of legitimacy at minimal cost. By the way, in Texas you just go to the Secretary of State's website, choose a name and pay $300 to set up an LLC. No need for a CPA.

From: https://www.nolo.com/legal-encyclopedia/personal-liability-piercing-corporate-veil-33006.html

The most common factors that courts consider in determining whether to pierce the corporate veil are:

whether the corporation or LLC engaged in fraudulent behavior
whether the corporation or LLC failed to follow corporate formalities
whether the corporation or LLC was inadequately capitalized (if the corporation never had enough funds to operate, it was not really a separate entity that could stand on its own), and
whether one person or a small group of closely related people were in complete control of the corporation or LLC.

lmbebo said:   Yes, my field of work is litigious ... So that hopefully an LLC will at least protect my family. 
  Get umbrella insurance.

lmbebo said:   Yes, my field of work is litigious ... So that hopefully an LLC will at least protect my family. 
  Check for available Errors and Omissions insurance. which I had to have as Notary Public.  It is offered to many professions.  Some insurance agents specialize in it ... Requires different insurance license than may agents have.

cleanbeat said:   just go to the Secretary of State's website, choose a name and pay $300 to set up an LLC. No need for a CPA.  

Technically, CPAs aren't licensed to draft legal documents, like Articles of Organization.
And sometimes the local legal beagles get to feeling left out and say threatening things to the accountants, like "unauthorized practice of law".

taxmantoo said:   
cleanbeat said:   just go to the Secretary of State's website, choose a name and pay $300 to set up an LLC. No need for a CPA.
  

Technically, CPAs aren't licensed to draft legal documents, like Articles of Organization.
And sometimes the local legal beagles get to feeling left out and say threatening things to the accountants, like "unauthorized practice of law".

  To be fair, I've seen some pretty disastrous work from accountants who didn't get the memo that California amended the Uniform LLC Act in 2014 which left old LLC operating agreements with some FATAL problems.

taxmantoo said:   
cleanbeat said:   just go to the Secretary of State's website, choose a name and pay $300 to set up an LLC. No need for a CPA.
  

Technically, CPAs aren't licensed to draft legal documents, like Articles of Organization.
And sometimes the local legal beagles get to feeling left out and say threatening things to the accountants, like "unauthorized practice of law".

  Agreed taxmantoo, OP will probably need a lawyer's help to create a framework that actually limits his / her liability.  But I would not pay a lawyer to search for an available name and register with the SOS.  It's probably online in just about every state by now.

I would also suggest locating a relative or friend who has been through the process for guidance.

forbin4040 said:   
lmbebo said:   Yes, my field of work is litigious ... So that hopefully an LLC will at least protect my family. 
  Get umbrella insurance.

  
Sole prop LLC= EZ to pierce corporate veil

umbrella insurance does not protect against professional issues right?



 

needhelpplease said:   
forbin4040 said:   
lmbebo said:   Yes, my field of work is litigious ... So that hopefully an LLC will at least protect my family. 
  Get umbrella insurance.

  
Sole prop LLC= EZ to pierce corporate veil

umbrella insurance does not protect against professional issues right?



 

  Setting up the LLC to protect assets isn't the right thing to do.  Setting it up so you can sell it later...yes...but to protect assets?  Umbrella ins.

needhelpplease said:   
forbin4040 said:   
lmbebo said:   Yes, my field of work is litigious ... So that hopefully an LLC will at least protect my family. 
  Get umbrella insurance.

  
Sole prop LLC= EZ to pierce corporate veil
 

  Are you just making this up?

Crazytree said:   
needhelpplease said:   
forbin4040 said:   
lmbebo said:   Yes, my field of work is litigious ... So that hopefully an LLC will at least protect my family. 
  Get umbrella insurance.

  
Sole prop LLC= EZ to pierce corporate veil

  Are you just making this up?

  I thought LLC was to protect your personal assets  from partners misdeeds



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