I was all set to register as an LLC until I found this:
http://www.real-estate-online.com/articles/art-303.html

Now I'm so confused! Should I not register at all? An S-corp sounds complicated.

At the end, she says this:

Yet I've had people come to me and tell me they run their eBay business through an LLC because someone said LLCs were the best business structure. I have the unhappy task of telling them that they are probably paying more tax than then need to because they took that advice.

In fact, it's really easy to get caught in this trap and pay more taxes than you need to by using the wrong (or no) business structure. Even if you're talking to a professional, if they don't ask the right questions, and you don't volunteer the right information, you could wind up in an entity that doesn't fit your business.

Active income vs. passive income



The rule here is whether the income is earned actively (you do or sell something) or passively (you receive rent from a property). If you're making active, or earned, income, then you'll pay more taxes than you should by operating through a sole proprietorship or through an LLC taxed as either a sole proprietorship or a partnership.

On the other hand, If you're receiving passive income from property rentals, then an LLC taxed as either a sole owner (Schedule E) or a partnership will save you tax dollars you'd otherwise spend if you operated this business through a C or an S Corporation.

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