i assume this is a tax (or legal?) question.

for people who are self employed, under what circumstances should they create their own company or not? my friend is a private tutor and didn't create her own company. on the other side, my coworker is a software developer, and he did create an LLC. what's the reasoning for it? is it for tax reasons, legal reasons, liability reasons, or what?

/e pm'd, I thought my warn was too high to post here.

This post was edited by wheniwassevenishotacheetah on Nov 15 2015 09:54pm

Tax reasons and legal/liability. I'm a software developer and I have my own corporation too.
Monetary:
- You can pay yourself dividends instead of salary and save on EI and pension payments
- Corporate income taxes usually work out lower than personal income taxes at our income levels, since corporate tax is a flat 15% but personal income brackets get significantly higher
- You can write off work-related expenses as business expenditures and save taxes on those. For me that ends up a decent amount of money - internet, phone plan (for both me and my wife together), transit pass/parking, computer equipment, lunches
- You can hire your wife or kids or other relatives/friends to split income and get lower tax brackets. They do have to perform some sort of real work for their pay, lots of guys I know hire their wives as "receptionists".
- If you have irregular work (lots of work one year but little the next), you can leave money in the corporate account and average out your pay to reduce taxes.

As far as legal and liability, you are protected by your corp. If your corporation ever gets sued, you can just dissolve it and make a new one for almost no cost.