Question for Tom - Form an LLC ?

[jonicurry]

Hello, I hope Tom sees this post The question has come up among a few of my friends lately, who are daycare providers, as to whether they should form an LLC for their daycare business. Some are being told by their accountants that this would be a good idea, in order to protect their personal assets in case of a lawsuit. I have always referred to the advice on your website, Tom, in which you have said there are many disadvantages to a home daycare provider in being an LLC - one of them being losing the ability to deduct our home expenses. But I keep coming across articles of tax tips to LLCs that talk about deducting home office expenses. Could you clear this up for me? As an LLC, we CAN or CANNOT deduct our home expenses? And why/why not? And is that unique to home daycare providers?

Thank you for your time!

[TomCopeland]

Llc

Hello, I hope Tom sees this post The question has come up among a few of my friends lately, who are daycare providers, as to whether they should form an LLC for their daycare business. Some are being told by their accountants that this would be a good idea, in order to protect their personal assets in case of a lawsuit. I have always referred to the advice on your website, Tom, in which you have said there are many disadvantages to a home daycare provider in being an LLC - one of them being losing the ability to deduct our home expenses. But I keep coming across articles of tax tips to LLCs that talk about deducting home office expenses. Could you clear this up for me? As an LLC, we CAN or CANNOT deduct our home expenses? And why/why not? And is that unique to home daycare providers?

Thank you for your time!

There are many different types of LLCs. If you file a single person LLC, you don't lose any house deductions. Your deductions are the same as a sole proprietor. The disadvantage of forming any type of LLC is the requirement to keep business and personal records completely separate. Also, there is a fee to set up an LLC as well as a annual fee. You also won't be able to completely protect your home and other property you use for your business from liability. Here's an article I wrote about this:

http://www.tomcopelandblog.com/2011/05/should-you-set-up-a-limited-liability-company-llc.html