As an independent contractor coaching soccer, what are the benefits of switching from a sole proprietor to an LLC?

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As an independent contractor coaching soccer, what are the benefits of switching from a sole proprietor to an LLC?

Worked as independent contractor coaching soccer with the same club for past 2
years, going into my 3rd year with a new coaching contract. I’ve worked as a sole
proprietor, but heard that forming an LLC might be better. I’m interested in
learning the tax benefits, including itemized deductions and claiming my car and
insurance are business expenses. Thank you in advance for your help.

Asked on March 20, 2017 under Business Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

Technically, anything you could claim as an LLC as a business expense you could claim as an independent contractor--the legal issue is, is it a legitimate business expense? If it is, then it is deductible, regardless of the business structure. That said, as a practical matter, having an LLC, having a separate LLC business bank account, and (as appropriate) a separate LLC credit card greatly facilitates taking business deductions, by making it very clear that those were business, and not personal expenses, and helping to distinguish business and personal expenses.  So having an LLC does not legally entitle you to take more deductions than you could otherwise, but will make it easier to take them.
That benefit, plus the liability protection (the main purpose of a "limited liability company), which will  insulate your personal assets (e.g. savings; house; car) from most business liability, make it very wise to conduct business under the aegis of an LLC.


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