<html><head><meta http-equiv="Content-Type" content="text/html charset=utf-8"></head><body style="word-wrap: break-word; -webkit-nbsp-mode: space; -webkit-line-break: after-white-space;" class="">This thread IS about my original grievance — Sec. 1706 of the Tax Code<div class=""><br class=""></div><div class="">It says so right there in the Subject line.</div><div class=""><br class=""></div><div class="">You’re a real estate professional lecturing computer consultants on stuff that works nicely in the real estate profession.</div><div class=""><br class=""></div><div class="">It can be harmful in THIS profession. Because of 1706. Which has nothing to do with either LLCs or Real Estate.</div><div class=""><br class=""></div><div class="">But there ARE companies who WILL NOT HIRE SINGLE-MEMBER LLC’S AS CONTRACTORS for gigs in computer-related high-tech gigs.</div><div class=""><br class=""></div><div class="">I’m not aware that situation exists in real estate. Are you?</div><div class=""><br class=""></div><div class="">What advice do you have for those of us who have LLCs and someone will only hire us as contractors if we’re either a C or S Corp?</div><div class=""><br class=""></div><div class="">THAT is the topic at hand. It’s irrelevant how simple it is to set up LLCs if people won’t hire your LLC. </div><div class=""><br class=""></div><div class="">If that was the case in real estate, you probably wouldn’t be using them, right?</div><div class=""><br class=""><div class="">
<span class="Apple-style-span" style="border-collapse: separate; border-spacing: 0px 0px; color: rgb(0, 0, 0); font-family: Helvetica; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-align: auto; -khtml-text-decorations-in-effect: none; text-indent: 0px; -apple-text-size-adjust: auto; text-transform: none; orphans: 2; white-space: normal; widows: 2; word-spacing: 0px; "><div class="">-David "The Tool Wiz" Schwartz</div><div class=""><br class="khtml-block-placeholder"></div><br class="Apple-interchange-newline"></span>
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<br class=""><div><blockquote type="cite" class=""><div class="">On Dec 8, 2016, at 6:48 PM, Vara La Fey <<a href="mailto:varalafey@gmail.com" class="">varalafey@gmail.com</a>> wrote:</div><br class="Apple-interchange-newline"><div class=""><p class="">I was clarifying generalized things for the poster who mentioned LLC as a suggestion from his accountant.</p><p class="">Was that poster you?? Then you're welcome. Was it someone else?? Then correct my errors or kindly stick to your original grievance.</p><p class=""> - Vara<br class="">
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<div class="gmail_quote">On Dec 8, 2016 4:39 PM, "David Schwartz" <<a href="mailto:newsletters@thetoolwiz.com" class="">newsletters@thetoolwiz.com</a>> wrote:<br type="attribution" class=""><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex"><div style="word-wrap:break-word" class="">I’m not sure what the point of these “Rah Rah for LLC!” posts is all about. Nobody has said anything to the contrary.<div class=""><br class=""></div><div class="">This list is primarily for people who work in the "high tech" (i.e., computing) industry, which is SPECIFICALLY what Sec. 1706 of the Tax Code deals with.</div><div class=""><br class=""></div><div class="">If you’re in Real Estate, Accounting, Architecture, or whatever, 1706 does not apply to you. It’s very, VERY NARROW in its applicability — BY DESIGN.<br class=""><div class=""><br class=""></div></div><div class="">Sec. 1706 eliminates the “safe harbor” provisions for people who work as contractors, eliminating any “benefit of the doubt” that is historically given in most other professions, and instead subjects workers and the companies that employ them to a vague 22-point (IIRC) series of questions that an IRS Auditor can use to establish whether someone should be (or should have been) regarded as a “contractor” or “employee” for tax purposes.</div><div class=""><br class=""></div><div class="">The problem is, this is not something that is adjudicated when you hire on, and it does not matter how many reams of paperwork you sign that says it’s one thing or the other.</div><div class=""><br class=""></div><div class="">It’s a ticking time-bomb that applies in the vast majority of cases 3-5 years AFTER THE FACT when the person — usually hired as a contract worker at the time — is audited by the IRS for whatever reason, and the auditor reviews one of his employment situations and subjects it to the 22-point “test”. If he rules the person was acting as a “contractor”, all is fine. </div><div class=""><br class=""></div><div class="">But if he rules the person should have been treated as an “employee”, both the person and the erstwhile “employer” just got nuked.</div><div class=""><br class=""></div><div class="">The back-due taxes assessed to the “employer", plus accrued penalties and interest, typically amount to far more than whatever the person was paid. The company has no knowledge anything went awry until they suddenly get a bill from the IRS. </div><div class=""><br class=""></div><div class="">Meanwhile, the person in question now has to “unwind” any business expenses and deductions, as well as anything that depended on them such as retirement contributions, FICA/FUTA/UI set-asides, etc. Everything is up-ended and needs to be re-filed. </div><div class=""><br class=""></div><div class="">And to add insult to injury, the same auditor is likely to flag previous and subsequent years for auditing as well, and what do you think he’s going to rule on other contract gigs that were fundamentally the same situations as the first one he nuked? </div><div class=""><br class=""></div><div class="">Again, if you’re not in the high-tech industry, this does not apply to you. </div><div class=""><br class=""></div><div class="">Having a single-member LLC stand-in to protect you against such situations can be helpful, IF the company you want to work with is willing to hire you. Many are not because of problems discussed in other threads.</div><div class=""><br class=""></div><div class=""><div class=""><span class="m_5795026969846564395Apple-style-span" style="border-collapse: separate; border-spacing: 0px; font-family: Helvetica; font-size: 12px; font-style: normal; font-variant-ligatures: normal; font-variant-position: normal; font-variant-caps: normal; font-variant-numeric: normal; font-variant-alternates: normal; font-variant-east-asian: normal; font-weight: normal; letter-spacing: normal; line-height: normal; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;"><div class="">-David "The Tool Wiz" Schwartz</div><div class=""><br class="m_5795026969846564395khtml-block-placeholder"></div><br class="m_5795026969846564395Apple-interchange-newline"></span>
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<br class=""><div class=""><blockquote type="cite" class=""><div class="">On Dec 8, 2016, at 4:53 PM, Vara La Fey <<a href="mailto:varalafey@gmail.com" target="_blank" class="">varalafey@gmail.com</a>> wrote:</div><br class="m_5795026969846564395Apple-interchange-newline"><div class=""><p class="">Yes, you can be the only user ("Manager" and "Member") of an LLC. I did it for years in real estate, and still have my LLC.</p><p class="">IIRC the form takes more like 5 min. You publish your intended LLC in the Record Reporter for 6 weeks. I forget the cost, but it's fairly cheap and easy. And IIRC, the Sec of State office (or wherever I went) has a form for that too. </p><p class="">LLCs are almost zero maintenance and are not sublect to hostile takeover. And so easy that some real estate investors create one for each property, just to keep properties legally isolated from each other for basic liability reasons. An LLC name like "<street address>, LLC" is one of those. (So named cause the investor realized that pretty names would be silly and confusing.)</p><p class="">Good luck!! :-)</p><p class=""> - Vara<br class="">
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