Rockville, MD asked in Business Law and Employment Law for District of Columbia

Q: Should I make an LLC and get paid through that, or just receive a W-2 like every other employee?

My new employer (there's only 2 of us in the company so far) has suggested I form an LLC so he can pay me through that instead of giving me a check each pay day like a normal employee would. He says the point of doing it this way is so I'll be taxed less and get to keep more of my money. However, is this legal to do? Even if it will save me money come tax season, it's not worth it if I could be operating in the grey area of the law. And if it's not illegal, is it better than just getting a check and W-2?

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1 Lawyer Answer
Andrellos Mitchell
Andrellos Mitchell
  • Washington, DC
  • Licensed in District of Columbia

A: It sounds like a dumb idea. You are taxed as a sole proprietor, which for tax purposes means you are taxed as an individual. The LLC is more about putting a veil between you and the company to protect your assets in the event the company is sued.

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