California LLC Tax Help?

Does a single-person LLC in California have any advantages?

• I started filling out an SS4 application for a single-person LLC in California, when in the instructions it says "By default, a domestic LLC with only one member is disregarded as an entity separate from its owner and must include all of its income and expenses on the owner's tax return...A domestic LLC may file Form 8832 to avoid either default classification and elected to be classified as an association taxable as a corporation." Now, my question is this... If I leave the default, is there any advantage to an LLC over a sole-proprietorship? I mean, if I am one an the same as the company, then do I miss out of the protection of an LLC. And furthermore, is there any tax benefit? Seems like it may be a waste. Please help.

• Answer:

  On the Federal level, there is no tax advantage to an LLC. You are taxed the same as a Sole Proprietorship. The advantages to an LLC are in its legal protection. In California, I believe all LLCs must pay a $800 annual fee to the state. Check with a California CPA or EA before you form the LLC