Has anyone here actually made the jump from a sole proprietorship to an LLC because their revenue started climbing?
I’m not really looking for a breakdown of the legal paperwork; I care more about the accounting side and the tax hit. I’m an economics student working in a small family business, and eventually, I’ll be taking the reins. Like everyone else, my goal is sustainable growth while keeping the tax man at bay. Why go the LLC route? Honestly, being an "LLC" sounds a lot more professional than "John Horvat, Custom Glassware Maker." Plus, with an LLC, my personal assets stay protected, and there can be some tax advantages depending on how you structure things. Before I sit down with our accountant, I wanted to get some real-world perspectives from you all.
The business is a 40-year-old small shop specializing in fiberglass and plastic fabrication. We currently have two employees, we're located in an area with a 10% local tax, and we operate under standard income tax rules. I don't manage the books myself, but for the sake of this question, let's assume we generate $167 in annual revenue and $117 in profit. Staying as a sole proprietorship with corporate income tax still doesn't make sense here because the payroll taxes would be double what they are now.
At what specific profit or revenue threshold does an LLC actually become more beneficial than staying a sole proprietor? Also, what’s the realistic difference in accounting fees between a small shop and an LLC (we handle about 50 invoices a year)? I know these aren't simple questions, but I'd love to see some concrete examples—ideally with actual numbers. Any insight is appreciated. 👍
