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Re: How to become a "Contractor" not a "Sub-Contractor"
Subject:Re: How to become a "Contractor" not a "Sub-Contractor" From:Andrew Plato <intrepid_es -at- yahoo -dot- com> To:"TECHWR-L" <techwr-l -at- lists -dot- raycomm -dot- com> Date:Sun, 9 Sep 2001 12:26:50 -0700 (PDT)
"Peter" wrote...
> > My accountant said that LLCs can often attract the IRS as they tend to
be
> > used by unscrupulous people who have scam companies. A full S corp
isn't
> > much harder to set up and maintain and won't attract the eyes of the
IRS.
>
> That particular statement is without foundation. I have heard variations
> on that and it simply is not true. I wonder if it reflects a gap in your
> accountant's knowledge.
My lawyer, 30 years in the business, said a very similar thing. Here is
how it was explained to me:
LLCs are often used by sham companies as a method to avoid taxes. These
crooks set up small "independent consulting" LLCs and funnel money through
them. They maintain a perfect income to debt balance so they never pay
taxes. In reality, all the debts are to other fake companies. LLCs are
also popular among inexperienced business people who, either purposefully
or not, don't pay taxes properly.
The independent contracting aspect adds even more suspicion. The IRS is
very watchful of independent contractors, because many people don't pay
their taxes properly when they are an independent contractor.
There is nothing "wrong" with setting up an LLC. They are perfectly legal.
I was merely suggesting that the original poster consider going directly
to an S corp due to the nature of LLCs.
In any event, the most useful advice is: get a lawyer and get some real
advice. We are not lawyers so anything we say is merely anecdotal.
Andrew Plato
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