The gig economy is also known as the sharing, on-demand, or access economy. It usually includes businesses that operate a digital platform to connect people to provide services to customers.
While there are many types of gig economy businesses, ride-sharing and home rentals are two of the most popular. Users of the digital platform (e.g., Uber, Lyft, Door Dash, VRBO) earn income providing on-demand work, services or goods.
Workers operating as drivers or other on demand work in the gig economy are classified as independent contractors rather than employees. It is recommended that Uber, Lyft, or other on demand workers form a Gig Economy LLC and use this tool to lower your tax bill and to protect your assets.
Benefits of Spiegel & Utrera, P.A.’s Gig Economy LLC
- Lower Your Tax Bill
- Avoid Personal Liability
- What are the benefits of forming a Gig Economy LLC
- Who Participates in the Gig Economy
Lower your Tax Bill with a Gig Economy LLC
By reporting Uber, Lyft, Door Dash, VRBO, etc. earnings under the umbrella of a business structure you may be able to lower your tax bill. An accountant or tax preparer will be able to assist you with deductions related to paying for health insurance, setting up a retirement account, claiming the qualified business income deduction, car expenses, depreciation expenses, home office deductions, financing costs for your business.
Avoid Personal liability with a Gig Economy LLC
Working in the gig economy can mean freedom and a better income, but it also means personal liability if there’s an accident or misunderstanding between you, the client, or the digital platform.
You will want to protect yourself and family assets by forming a Gig Economy LLC. LLCs generally don’t require a ton of maintenance, the LLC protects your assets, and offer potential tax savings.
Operating your business as a sole proprietorship (yourself) or as a DBA is not recommend because your personal assets — like your house, car, personal bank accounts, etc. — would be at risk if you are sued.
What are the benefits of forming a Gig Economy LLC
Limited Liability Protection
Starting with the most crucial benefit of a GIG ECONOMY LLC, limited liability can separate the financial and legal obligations of the company from its members. In case of a lawsuit, you can be protected due to a legal shield the entity provides, which defends personal assets. Keep in mind that this liability protection is limited and will not shield a member from wrongful or illicit acts.
Pass-Through Taxes
Another vital benefit of a GIG ECONOMY LLC is its ability to avoid federal income taxes. Taxation will bypass the LLC and go directly for the members’ profits. In this scenario, all of the money earned by the LLC can go straight to the member, and taxation will only occur on their income. Other entities such as a C-Corporation don’t have this advantage, and its leaders are essentially taxed twice.
Simplicity and Flexibility
Other GIG ECONOMY LLC benefits include its ease in formation and simplicity to sustain when compared to other entities. You don’t need to maintain certain company formalities or file taxes for the single-member LLC. You also have the flexibility of functioning as a single-member LLC, a multi-member LLC, or a multi-member LLC led by an operating manager.
Increased Perception of Credibility and Reliability
As a formal business entity, a limited liability company receives the perception of a more trustworthy business structure when compared to an individual or a sole proprietorship. Starting a GIG ECONOMY LLC adds an extra layer of reliability for employees, customers, and other businesses. Your LLC is required to adopt ‘LLC’, ‘L.L.C.’ or ‘limited liability company’ into its name, which immediately lets people know that you are a formal business and not just a fly-by-night company.
Who participates in the Gig economy?
Gig economy workers accounted for 14.1 percent to 20.5 percent of all workers in the United States. Gig economy workers on average are older than the entire workforce and the average age of gig workers has increased more rapidly. In addition, gig economy workers are more likely to be married than all workers, but the spouses of gig economy workers are less likely to have full-time jobs.