Yes you would keep a certain amount of money in the company accounts for expenses. The company expenses would have to be paid by the company (as opposed to your personal income which is passed through to you) for these expenses to be tax deductible (right? I'm not a tax guru either.)

@rwhitman I wasn't necessarily referring to a salary. I know that you can't pay yourself a salary as an employee when you are the owner of the sole proprietorship. As the owner in such a case, essentially you are the company, not an employee.

As I mentioned in my other reply. I'm thinking that giving yourself regular payments from your business account would be a better way of showing a regular and steady income than showing the more crazy activity of the business account

I think the biggest problem is that he simply couldn't give a straight answer to questions. He could only say he is a freelancer and he works for himself. He could have said that he is a sole proprietor and that his company name is x.

You can pass through whatever you want but you should pay all the expenses through your LLC, otherwise you "pierce" the liability veil.

TIP: presuming you are in the US and you are married to someone who has a full-time job, you can save a large chunk of money if you sell 99% of your company to your spouse, have them be a passive partner, and distribute 99% profits to them. (Ask your accountant for details).