Robert Flach announced his newsletter, The Schedule C Letter. Robert notes,
THE SCHEDULE C LETTER is a bi-weekly newsletter that provides tax planning and preparation advice, information, and resources for sole proprietors and one-person LLCs who report their business activity on IRS Schedule C
The newsletter, which will be sent via US mail, costs $24.95 for 6 issues. The newsletter will begin publishing in January 2011.
Peter Pappas doesn’t like Schedule C businesses. His view, which I share to some degree, is that any business worth having should be either incorporated or in an LLC that does not file a Schedule C. The primary reason for his view is, I believe, that a Schedule C business has ten times the risk of audit of a non-Schedule C business (all other factors being equal).
Well, I agree to a point. Unfortunately, I deal with one group of individuals who cannot incorporate (or form an LLC) in all jurisdictions. Many states disallow professional gamblers from incorporating because gambling is against public policy (even though it’s legal in that state). My guess is that Mr. Pappas would say that those clients are the exception that proves his rule.
Well, who is right? Mr. Pappas is absolutely correct about the risk of audit. Additionally, for a business that is grossing $100,000 or more, and especially any business of any size with any liability exposure, a business structure (LLC or corporation) is nearly mandatory. Yet what if you are a single member LLC, and you do not want to be taxed as a corporation? You’re going to file a Schedule C.
Perhaps it’s just two individuals looking at an issue from their perspectives. That said, businesses of significant size should definitely look at not filing a Schedule C. And if you do file a Schedule C you should definitely look at Mr. Flach’s publication because making mistakes on your return will cost you time and money.