Many taxpayers are able to support themselves working as a self-employed LLC consultant. If you make even a small amount of money during the year from consulting new business owners on the legal implications of using an LLC structure, there are a number of write-offs you can take on your income tax return to reduce the amount of earnings that you have to pay tax on. However, there are a number of IRS limitations on the type of expenses you can deduct for an LLC consulting business that must be aware of before preparing your 1040.
LLC Filing Fees
When part of the LLC consultant services you normally provide includes filling out state LLC formation documents, such as certificates of organization, and filing them with the relevant state agency, you’re probably well aware that filing fees are usually required. If you include all LLC filing fees in the price, you can write it off as an ordinary business expense on your Schedule C (or Form 1120 if operating a corporation). But if the filing fee is separate, meaning your clients pay the fees in advance, you can’t write the filing fees off, but you also don’t have to include those amounts on your tax return.
Education and Publication Write-Offs
It isn’t necessary that you be a lawyer or hold a certain type of degree to work as an LLC consultant. As long as you’re familiar with state LLC laws, you can grow your consulting activities into a thriving business. At some point, though, you may decide to enroll in business law courses. When you do, the IRS lets you write off the tuition as a business expense on your tax return. Moreover, you can also write off the cost of subscribing to journals and magazines that are related to LLC consulting since it’s necessary for you to stay up-to-date on LLC legal developments in every state.
Office Supplies, Rent, Travel & Salaries
As is the case with most businesses, you’re going to pay a number of general business expenses that are eligible for a write-off. Though not a complete list, these expenses typically cover the monthly rent for an office, the cost of advertising your consulting practice, ordinary office supplies like paper, pens and staplers, the cost of purchasing computers, printers and software as well as the expenses you incur to travel to clients. Moreover, if you ever hire employees or contractors, all amounts you pay them are deductible.
Employed as an LLC Consultant
The write-offs you can take as an LLC consultant are a little different if you are an employee. In order to deduct business expenses that relate to your job, the IRS requires that you not receive reimbursements or allowances from your employer for them. Even if you can satisfy this requirement, you can’t write off anything unless you elect to itemize deductions on Schedule A, and in most cases, prepare a Form 2106 or 2106EZ to report all of your employee expenses.
Reference: IRS Publication 535-Business Expenses