Is an LLC for me: Do I need an LLC on my freelancing journey

Afrofreelancer /Freelancer /Is an LLC for me: Do I need an LLC on my freelancing journey

When you’re taking that leap into the freelancing world, there are so many questions you begin to ask. The main concern is what type of business entity do you need to setup. Do you need to open a business account? How should you handle paying taxes? Can you do business as yourself or do you need to open an LLC? If you listen to social media for business advice, you probably think you need to setup a corporation and immediately start claiming the plentiful of tax benefits that come as a business owner. However, before you make any major moves check out the reasons you may or may not need an LLC at the early stages of your freelance journey. But before we dive deeper we must tell readers that this blog is not meant to replace professional advice from an accountant or attorney. 

 

Benefits of an LLC:

 

  • In case you aren’t aware, LLC (Limited Liability Company) is a business structure that grants businesses limited liability. When you have an LLC you protect your personal assets from things like business debts owed by the business, lawsuits and liens. If any of these things should occur they will be covered under the LLC.

 

  • As a LLC, especially a single member LLC, you have flexibility with taxes in that you get to decide how you want to be taxed. You can choose to be taxed as a sole proprietor or a corporation. If you file taxes as a single member LLC then you would file a schedule C, profit & loss from business, which would be the same form you would already use to file as a freelancer. When you fill out a schedule C, you then become entitled to tax deductions such as mileage, equipment and other business-related expenses.

 

  • If you decide to take your business to the next level by applying for business funding such as business loans, then having your business registered as an LLC or any other entity will be required and overall will look more professional in the government’s eyes.

 

Cons of an LLC:

 

  • When you start out on your freelance journey by default your business is considered a sole proprietorship, which when you file taxes will give you some of the same benefits as an LLC.  This is not to say an LLC is not needed but if you are still trying to figure out what works best for your business there will be no rush to file an LLC. 

 

  • If you are starting your freelance business with other people then forming a multi-member LLC will not require an operating agreement, thus possibly creating issues of who can enter into contracts for the LLC. IT will be important to have individuals identified with their titles and roles to reduce issues as far as day-to- day decisions.

 

This article does not offer many cons of having an LLC because truthfully, there are not a lot of cons. The main question that you need to be asking yourself is what type of business entity works best for you and your business. However, if you still have a 9-5 and are starting out your freelance journey having a structured set up can offer benefits and tax savings in the long run.