A Redditor initiated a discussion in the FIRE community regarding the benefits of forming an LLC for tax purposes. Most responses pointed out that while LLCs provide liability protection, they do not generally reduce tax bills. However, when taxed as S Corporations, significant tax savings can be realized by avoiding self-employment taxes on distributions. There's a notable tension regarding reduced Social Security payouts associated with avoiding taxes, prompting a consideration of long-term financial implications for those nearing retirement.
LLCs only shield you from liability; they don't reduce your tax bill, but having it taxed like an S Corp can lead to substantial tax savings.
An S Corp allows you to avoid self-employment taxes, but some people may be concerned about having lower Social Security payouts when they get older.
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