4 Reasons to Set Up an LLC

New, and even established, business owners often ask about this topic. And with good reason. Setting up a corporate entity often means talking to a lawyer, it may mean a deeper commitment to your work than you have had, perhaps it means additional expenses that may feel intimidating. Or, it may just be time to tackle it and you're not sure where to start or whether you need it.

So, here are my top 4 simple reasons to go ahead and get that LLC done already:

1) Limited liability – heck, that’s what the two “Ls” stand for. But there are lots of things you need to do beyond just doing your online state filing in order to preserve your limitation of liability, including keeping your business and personal finances separate. What it means is that only your business – and not your personal – assets are exposed to lawsuits and creditors if anything unexpected happens down the road. Liability insurance is another piece to this puzzle, too, but establishing an LLC is a good start to keeping your business and personal life separate. How you manage your time in that regard is a whole other story and we can talk about that, too.

2) Tax savings – an LLC can be taxed as what is called a “disregarded entity” – meaning the income flows to you and you pay your employment and other taxes and take deductions – or as an S corp. Taxing as an S corp requires more administration on an ongoing basis and may not make sense if you haven’t passed a certain revenue threshold, but it can also lead to big savings at tax time. If you want to explore establishing an LLC for tax savings, it is important to include your tax professional in the conversation to determine if now is the right time for you and how the administrative piece will be managed.

3) Other people may take your business more seriously. The first time I heard this concept, I scoffed. I had been taught early on that for certain types of businesses – especially sole proprietors (the majority of business owners I work with) – setting up an LLC didn’t really matter. And when I heard someone say that others may take a business more seriously, it made sense to me. Especially for sole proprietors. Taking the extra steps to establish a corporate entity shows other people that you are planning for the long haul. That a passion or a hobby is now a lot more than that. And it may even help friends and family members get on board with your new venture and support you, knowing you’re taking it seriously.

4) You may take your business more seriously. As with number 3 above, taking steps to show your level of commitment to your business can add to the energy that you’re a business owner. Dabbling with creating a website, contemplating logos, fussing over business cards, languishing over choosing a business name – these are the things I see wanna-be entrepreneurs struggle with for hours, weeks, months, or even years (that was me when I re-branded and re-launched my law practice. Years.). Establishing an LLC is something most get to only after they have the basics in place, such as a name, address, phone number, and website. It’s a sign that the early deciding to do it phase is over.

And it’s time to get down to business.

Sure, there are lots more things to talk about in the context of LLCs, but these are my top 4 for those who are wondering if it’s time to take the next step. Perhaps it is, maybe you’re not there yet. But when you are ready, rest assured that there are lots of pros, very few cons, and that doing it likely means you’re ready to go to the next level.

If you would like to talk more about your situation, book a free call to find out if you’re ready to get the ball rolling. And be sure to join our newsletter list to make sure you hear about all upcoming events for business owners.