This is entirely false. Every LLC distributes all of its income to its OWNERS as a K-1. That income goes on their TAX STATEMENTS. They are responsible for their FICA, MEDICARE, etc. That is about 15.3%. The ONLY WAY you don't pay this, is if your employer paid half, as is customary. ALL OTHER INCOME DERIVED FROM WORK MUST PAY THIS, your absolutely uninformed opinions aside. That is what "self employment tax" means. You pay both halves. Perhaps you would care to show the IRS page that backs you up. Good luck, you will need it.
The members of the LLC are still required to pay SE taxes on their income distribution of their K-1 on their personal taxes. The big benefit is to be able to expense as much as possible against your income in your LLC or Corp. Then, you should pay most of the distributions in the form of dividends to the owners that are not subject to SE taxes. Most accountants I have talked to say to pay 30% in normal distributions (via w-2) and the rest in dividends (1099-DIV) This way, you must pay SE tax on about 30% of your income after expenses and avoid paying the SE tax on the rest. Any less than these ratios and you will most likely lose in an audit. But in the end, if it ever goes to audit, it will be you justifying your case vs. the IRS' case. Even if you lose, you will most likely end up paying less taxes. Just make sure you aren't blatently breaking the law.
I'm glad I haven't fired my accountant yet. The best one can do is to aggresssively play the system by their (IRS) rules. I haven't found a way out of the tax and self employement taxes except stop working or start cheating. Neither one is an option for me.
That is not how working as an independent contractor works. If you hire yourself out to work at IBM on a contract basis, you cannot hide 70% of your income as "dividends." And it is not a set %, you have to pay yourself as reasonable wage for the work performed. The ratio is very dependent on how much is made, and what a reasonable salary would be. So if you hire yourself out as a 15-year industrial engineer, you cannot make $100,000 and take 30% as wages, that is not going to fly. The govt is not that stupid. Engineers do not make that little fulltime.