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I'm a freelancer who offers digital marketing services. I recently established an LLC under a DBA name. From what I understand there is no difference between me and the LLC, and that we are the same entity, as I'm a single LLC owner (I have no employees).

With my existing clients am I able to claim that income at the end of the year as LLC profit (only claiming it once of course) given that I invoice companies under my name and not my LLC's name?

When it comes to clients, I did A/B testing and found that:

Small - medium sized clients are more likely to hire me when I brand myself as just me rather than a company.

Large sized clients prefer hiring a company over an individual (even if that company is only 1 person).

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Even as a single member LLC you must keep finances separate. You must have a bank account for the LLC which is not your personal bank account. Then you can pay yourself (or take dividends) from the LLC funds. But you can not deposit the LLC money into a personal bank account. Well, you aren't supposed to. I guess a bank may allow you to, but legally you really want separate accounts.

There is a legal difference between you and the LLC. You need to financially operate as if you are not the LLC and the LLC is not you. And you need to present the business as an LLC not as you personally. It's fine if you present the business as an LLC owned and operated by yourself. But you should never get payments from clients under your personal name. They should all be paying the LLC, not you. (To be frank, any client worried about this is probably not worth the gas it takes to drive to the bank to deposit their check. I've never, in over a decade, run into a single client that had a problem making a check payable to my LLC rather than to me.)

You should never be paying for personal items (groceries, dates, entertainment, etc) from the LLC account. The LLC account should only be paying business expenses. It is also wise to not pay yourself a regular, steady paycheck from the LLC. You can take dividends whenever you want, but not adhering to a set schedule is beneficial (at least that's what I was advised by my attorney). So take some this week/month, then don't take anything a couple weeks/month, then take a different amount the following week/month ... that sort of thing.

The entire point of an LLC is to "Limit" your "Liability". If you fail to keep finances separate, and appear to be "living" off the LLC, a judge can immediately dissolve a single member LLC and hold you personally responsible for any judgement/settlement (heaven forbid) rather than the LLC, thus removing all liability limits. As a single member LLC, only by rigidly keeping finances separate can you try to combat such an occurrence.

All that being posted.....

Yes, the IRS permits you to file taxes as an "individual with a single-member LLC" rather than filing twice. You won't be taxed twice. I run a single-member LLC and merely file a 1040 and schedule C every year under my name, not my LLC. The income is added to your taxes as 1099 income or "general" income along with any W2 income. You do not file taxes for the LLC... you file your personal taxes claiming the money earned through the LLC. This option of filing taxes on you own, personal taxes is only permitted by single-member LLCs or sole proprietorships. As soon as you have another member in the LLC.... then the LLC will need to file its own taxes. And at that point I'd suggest you hire an accountant if you haven't done so already, because then you get into tax issues with payouts to members (dividends), etc. and things are no long "easy" at that point.

(Yes, basically the IRS treats the LLC as if you are the LLC ... but a judge doesn't want you to to that if you wish to actually limit any liability. That's government for you.)

  • +1, really good answer. I'm curious (if your attorney happened to explain the reasoning) why it's wise to pay yourself at unusual times instead of doing so on a regular schedule. I was recently wondering about this myself and had thought the opposite would have been true. – Josh1billion Jun 13 '16 at 22:19
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    @Josh1billion Like I posted above, if you're seen to essentially be living, day to day, from the LLC income it becomes easier for a judge to dissolve the LLC (on the spot). At least that what was explained to me. For some reason, living off of extracted dividends is fine, but a regular check makes you too much like an employee of the LLC or it makes the LLC too much like a false facade. To be frank, this is just the advice I was given. I've never actually been in a [legal] position to know if it's true or not. – Scott Jun 14 '16 at 0:46
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In addition to Scott's excellent answer, a sole proprietor DBA is different than an LLCs.

With an LLC, the proper way have a DBA is to register it with the State under the LLC. The LLC functions as an umbrella company to the DBA. So in other words, the Doing Business As your custom name is under the LLC which offers the liability coverage.

Unfortunately, a sole proprietor DBA cannot be registered twice. That is, the EIN won't be any use to the LLC. You may want to slowly dissolve it too as you let the LLC be the primary entity.

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