Are there tax benefits of starting a LLC in NJ if I'm not earning a ton of freelance money?

Question

Hi - I earn about $3,000 a year on various freelance projects, ranging from entertainment writing to interior design. This is a relatively small portion of my income, and I've been listing it as ordinary income, filing 1099s and taking no deductions. I'd like to start an LLC, both to give more legitimacy to my work for my clients and to be able to take the home office / business expense deductions that I'm currently not.

I plan on doing the same volume of work and never hiring employees. Is this a smart tax move for me? Between computer equipment, the home office deduction and other expenses, I'd probably write off at least $6,000 in expenses a year. I'd love for the freelance business to take off one day, but I can't count on it and need to base my decision on current numbers. Thanks!

Answer 1

  I don't see any reason that you would need an LLC...your liability should be almost none existant.

  Having an LLC would not allow any further deductions.

  If the biggest reason you want to start one is being able to create a loss..the rules are still the same (usually a profit in 3 out of 5 years, in your case, or it is a hobby and the expenses are limited to income). Basically, all you would be doing is creating more paper work for yourself with very little if any benefit.

Hope this helps.