I created a business during the pandemic and I am thinking of creating an LLC for it, mainly for tax reasons. I received a very generous financial aid package, almost full cost.
My college only requires to fill out the CSS profile when first applying, which means I no longer have to file the CSS profile. However, I have to file FAFSA every year.
My question is would owning a LLC affect my financial aid package? Do I have to report the LLC under my assets on FAFSA?
Thanks for any help given.
It is my understanding that if there was profit in you business (LLC) that would show as income on your personal tax return - and that might matter. I would assume if there was a loss, that might help you. Please confirm my answer with a true specialist in this area. What is the reason you wish to file/become an LLC? Depending on the size of the business, you may be able to avoid that all together. Do you expect to reach a revenue number that you feel will raise eyebrows with the government? Most very small businesses remain under the radar - whether that is truly appropriate or not. I would ask yourself the question - 1. did you reach sales of $50k or more in 2020 2. Was some of your revenue, pandemic revenue, and will it be sustainable or grow in future years. Managing an LLC adds costs and complexity that I would prefer you not need to deal with, regardless of financial aid effects. Proceed with caution and consult a real expert.
Thanks for responding. I most likely won’t do $20k or even $50k in sales. I did further research and found out the exact thing you told me, I have to file it under my personal tax returns.
Would you recommend that I just continue my business without a LLC? (In your personal opinion) Since I sell mostly on eBay.
Is the reason you need to file at all because eBay provides some receipt or verification? I think it will be more cost-effective for you not to, but I can’t speak about what is legal. I have assisted a number of younger people with their business, and most accountants say not to worry about it if very small. But, please do that research on your own, because I may be wrong and do not want to encourage you to do something that could hurt you in any way.
Whether or not you make your business an LLC won’t affect financial aid. Regardless of that status, you have to pay taxes on your earnings, so the net profit will be reported on your tax return. You can make your decision about whether or not to be an LLC independent of worry regarding that decision affecting financial aid.
This is not professional advice. For that, consult a professional not someone on the internet. 
At that revenue level I would not form an LLC. The LLC must file its own tax return, an added expense. There can be tax advantages to forming an LLC down the road, but the downside is additional record keeping, business licenses, tax returns, etc.
Regardless of if you form an LLC, the income should be reported on your personal tax return. (Self-employed individuals (no LLC) file a form 1040 Schedule C for business income and expenses.) Therefore it will be reported to FAFSA. I can’t answer how that may affect your aid package.
Congratulations on your business. I hope it continues to succeed.
Usually you form an LLC for liability purposes, not revenue purposes. What’s in a name? LLC stands for “limited liability company”. While corporate-form entities allow for revenue sharing, their major benefit (often forgotten) is to shift liability away from the investors, whether they be shareholders or members. This is why few people form general partnerships these days (though occasionally you see limited partnerships with a limited liability entity as the general partner). Check your state laws (and consult a lawyer).