LLCs and Tax Advantages for Freelancers

[kevin1]

An LLC isn’t just about legal protection—it can also be a tax strategy. Freelancers can choose how their LLC is taxed:

Default as Sole Proprietor: Taxed on total income, including self-employment tax.

Elect S-Corp Status: Pay yourself a salary, reducing self-employment taxes.

For example, if you earn $100,000:

Sole proprietor: income + self-employment tax on $100k

S-Corp: income taxed normally, but payroll tax only on your salary portion ($50k), saving significant money on taxes.

Generally, an S-Corp election is most beneficial once you’re earning over $100,000 as a freelancer.