John Dollus

I would agree with Ernest and definitely recommend you go with C over LLC. With a C corporation, you will experience double taxation where the income is taxed both when it is received by the corporation and when you receive disbursements for your own compensation. With LLC, all income is passed through to the owners and taxed as income but you also must pay self-employment tax since it is treated the same as a sole-proprietorship in most cases.

Bottom line: find a good accountant to steer you the right direction and make him/her your best friend.

Ernest: That illustrator in Missouri would be **** Sneary. It was quite the court case way back when.

Ernest Burden

Yes, but the corp is only taxed on profit. Guess what--my company usually doesn't make any. The income all gets spent on deductables like salaries (me), freelancers and equipement, regular business stuff. At the end of the year there isn't much left in the company to be taxed, so I often pay the minimum tax, which may be $100. I forget if that's a Federal tax or a NY State one.

Obviously I pay regular income tax on the money I got as salary from my corp, like anyone who has a real job. And the company pays the FICA tax, as a freelancer you pay this but its called 'self-employment tax', same thing, same amount. Except with a copr some of the money you draw can be called something other than salary, so no FICA tax, just regular income tax. I don't know how that is arranged, that's my accountant's expertise.

Yes, I've had a long conversation or two with him about it. I didn't use his name because I didn't want to imply that he had done something wrong, and without the full story it could appear that way. I said 'he lost'. He did, but it was on an interpretation of what the laws in his state required of an illustrator. It's far from clear. Although in NY there is now a set of guidelines that do a good job of describing how to handle sales tax relative to our field. It was the result of my work with the NYSR on the problem and I'm very proud of it:
Guidelines, in PDF

The language is rather stilted, but you'll get the idea. Notice how my questions (I wrote most of the questions asked) lead the state to put the liability on the client and relieve the renderer as long as he/she makes an effort. THAT was a big change.

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Ernest Burden III
AcmeDigital
architectural rendering