Re: Operating as an LLC
Evan,
What Brian mentioned above is the default for a single member llc, but you can choose the tax classification of your llc. By filing an 8832 and then a 2553, you can elect to have your llc treated as an s corp for tax purposes.
The main purpose of doing this is to allow some of your llc's income as a distribution, and therefore treated as dividend income not subject to seca taxes. Because 8832 changes your election to a corporation, you'll have to start doing corporate filings each quarter. There is a small alphabet soup of other forms that follow for the s corp, e.g. 1120s and k-1 filings.
Once you business is stable enough that you can pay yourself a regular monthly salary, and/or secure a short term credit line to even out the cash flow and pay yourself each month, then that's a good point to talk to your tax pro about 8832 and 2553 and avoid some of the seca taxation.
An llc elected to be taxed as an s corp is a good balance between the onerous level of paperwork for a true corp, and the lack of tax flexibility of a single member llc treated as a disregarded entity.
Also a personal hat tip to Brad Weber who has been a great sounding board and clarifier to me over the past few years on where to look next on these issues. I'm through one llc life cycle and working on another.
