There is a lot of loud advice online that says “you must have an llc” or “you are leaving money on the table without an s corp.” The reality is more nuanced and depends on your profit level, risk, and preferences.
Llc Is A Legal Wrapper, S Corp Is A Tax Election
An llc is formed at the state level. An s corporation is a way for certain businesses to be taxed if they meet specific requirements. You can have an llc taxed as a sole proprietorship, partnership, or as an s corp.
When Simplicity Wins
If you are just starting or your profit is still low and inconsistent, a single member llc taxed as a disregarded entity is often enough. You avoid payroll complexity and extra filings while you validate your business and learn your rhythm.
When To Ask About An S Corp
Once your consulting profit is comfortably beyond what you would pay yourself as a reasonable salary, the s corp election might be worth exploring. At that point, a real conversation with a tax professional who understands your full situation is essential.