Sec. 1706 of the Tax Code

[James Dugger]

It is understandable that hiring a contract employee's LLC is risky, the
answer is in the name - Limited "Liability" Company.  LLC's were designed
to make it easy to get the advantages of incorporation without its full
formal rigid tax and accounting structural requirements.  The biggest
advantage is as a liability shelter.  The Real Estate Development Industry
literally runs on them.

They are intentionally setup to make it legally difficult for another
entity to "pierce the financial veil of the corporation".  The biggest
advantage of an LLC is not the one your contracted with.  It's the second
or third that you don't have access to.

What I mean by this is that if you are an entrepreneur and you own say 5
different businesses all LLC's and one client contracted through one of
your LLC's successfully sues you, Assuming your other LLC's are not
contracted with the client (under the same contract) They legally cannot
pierce your other LLC's to go after additional assets. This is by design.

I have several LLC's and have used them to shelter activities between
contracts for years, for this reason.  Granted I am not contracting as a
"contract employee" in these instances clients are hiring my company. As is
how it should be.

So it is understandable that large corps would not want to hire LLC's
because they are taking the risk.

On Thu, Dec 8, 2016 at 10:26 AM, Rusty Ramser <rusty_ramser at hotmail.com>
wrote:

> "Forming an LLC in AZ is simple ... and takes 3 or 4 hours (for a
> beginner) over about 6 weeks."
> It's even easier than you realise.  It should take about 1 hour (2 at the
> absolute most) over the course of a single Saturday afternoon.  If you want
> to hand-carry your forms into the government office in downtown Phoenix
> that processes them, that will add a few hours during the work week.  But
> barring that, it's absurdly easy to set up an LLC.  There are plenty of
> lawyers, CPAs, etc. that are happy to charge you a hefty fee to handle the
> paperwork of establishing an LLC -- don't fall for that rubbish.
>
> Cheers.
>
>
> -----Original Message-----
> From: PLUG-discuss [mailto:plug-discuss-bounces at lists.phxlinux.org] On
> Behalf Of Keith Smith
> Sent: Friday, 9 December 2016 04:01
> To: Main PLUG discussion list
> Subject: Sec. 1706 of the Tax Code
>
>
> David, you have brought up Sec. 1706 of the Tax Code several times over
> the years.  I am not familiar, however from what you describe it sounds
> like it prohibits a programmer from becoming a sole proprietor, however it
> sounds like it does not stop agencies from doing contract work.
>
> What is an agency?
>
> I'll read Sec. 1706 of the Tax Code when I get done with my current
> project and have more time.
>
> Sounds like the solution is to form an Limited Liability Company (LLC).
> My accountant says it is legitimate to form an LLC and be a one man band
> and to have only one client.  He say that is a legit business.
>
> Forming an LLC in AZ is simple.  Fill out the forms the state provides pay
> your fee with the filing and publish.  I think it costs about $85 and takes
> 3 or 4 hours (for a beginner) over about 6 weeks.
>
> Anyone have any thoughts?
>
> --
> Keith Smith
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-- 
James

*Linkedin <http://www.linkedin.com/pub/james-h-dugger/15/64b/74a/>*
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