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Business entity selection for freelance DPs

LLC freelance taxes taxes for freelancers cinematography freelance DP business entity

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#1 Ben Joyner

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Posted 04 June 2016 - 01:34 PM

Hey guys, 

 

I wanted to gain some more insight from some other freelance DPs on registering as a single member LLC. Mainly what the advantages are, your experiences, or if there are other entity options, (i.e: sole proprietorship, etc) that i should be considering.

 

I have recently become a full-time freelancer and am looking into the best options for me come tax season. I'm not local 600 (hopefully soon,) not sure if union status makes a difference though. 

 

Thank you! 

 

-Ben Joyner


Edited by Ben Joyner, 04 June 2016 - 01:41 PM.

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#2 Landon D. Parks

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Posted 05 June 2016 - 03:40 PM

I'm not a DP, but a general filmmaker. I own several businesses, and I do have a degree in business, so I'll offer you this advice:

If you're a single person (non-partnership), an LLC is your best bet if you're looking for asset protection. Corporation is an option, but the paperwork is a lot harder, it's usually more expensive, and requires a lot of formalities that LLC's don't. Any other type of non-entity, such as sole proprietorship with a dba etc., allows for no asset protection - and you report all income and loses on schedule c of your personal tax return. 

 

Really, it depends on what you want and need. IF you own a lot of equipment and things, starting an LLC and transferring ownership to the LLC can protect your equipment if you ever need to file for personal bankruptcy (in most cases, see a lawyer) or other such legal issues. Plus, you're not liable personally for the debts and liabilities of the LLC (I'm sure a few forum people will chime in here and give their 'vast' experience about how such entities do not protect you at all), but I can tell you that is one of the primary benefits of an LLC and corporation.

 

I don't know Texas law or procedure, but generally you can visit the secretary of state website for TX and click on business division. Most states now have the ability to form an LLC or corporation online - you just need to register and complete the one-page articles of organization and pay the fee.

 

Don't know how union status affects this, if at all.

 

In terms of 'best tax' - it really won't matter. If you form an LLC, you'll pay taxes the same was you would a sole-proprietorship (non-legal entity). In an LLC, you are also responsible for self-employment taxes - which can amount to about 13% on top of your regular income tax. If you form a corporation, you'll pay up to 35% in corporate taxes, and then up to 15% in dividend taxes on whatever you take as a dividend. You don't pay self employment tax on a corporation income or dividend, but legally if you take any money at all from the corporation - you're suppose to take it as a salary, in which case the 'self employment' taxes are split between you and the company. The IRS states that the amount you take as a salary must be comparable to what others organizations pay someone of the same experience and job title as you. Anything extra you want to take can be taken as a dividend at up to 15% tax. 

 

*I'm not an attorney and this is not legal advice.*


Edited by Landon D. Parks, 05 June 2016 - 03:46 PM.

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#3 Ben Joyner

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Posted 13 June 2016 - 03:41 PM

Thanks Landon! This is great. Super helpful. 


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#4 Tyler Purcell

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Posted 13 June 2016 - 03:58 PM

Basically, if you have business expenses to write off and make above the 2nd tier tax bracket every year, then it's worth having an LLC. If you don't have much to write off and you're not making much money, I wouldn't bother.

Most industry professionals have their own LLC because they do make more then the 2nd tier tax bracket and they have a lot of write-off's that can't be done through personal tax returns.
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