As a freelancer, it’s important to protect yourself from any risks involved in your job. These can sometimes lead to debts or legal judgements against your business.
Setting up your business as an LLC decreases this risk by separating your personal assets from your business assets. That means your personal earnings, savings, and properties are better protected if you ever fall into debt or get sued.
Form your LLC with us today to protect your assets at our special discounted rates.
If you’re like most freelancers, you can’t imagine going back to a 9-to-5. Being your own boss is incredible — you decide your own schedule, you design your own workflow, and you choose your own projects.
However, with great freedom comes great responsibility. You’re running a one-person operation, and there’s a lot on your plate. One of the most important aspects of being a freelancer, and one of the most overlooked, is your personal liability. Even though you aren’t in a large organization, freelancers are still subject to the legal scrutiny and financial repercussions that big businesses often face.
If you’re operating your freelance business as a sole proprietor — you’ll know you are if you receive payments under your SSN — you’re the only one in the spotlight when things go wrong. If that feels like a raw deal (spoiler alert: it is!) or you’ve heard about LLCs, S Corps, and C Corps before and want to learn more about how they work, read on.
And if you’re ready to make the move to forming your own LLC, get started at $0 plus state fees with our partners at ZenBusiness.
Collected here are our favorite blog posts below to learn more about incorporating your business as an LLC:
Here’s an example of what can happen to freelancers who operate outside of an entity (such as an LLC, S corp, or C corp):
Consider a personal trainer who is operating as a sole proprietor. If a client is injured during a training session, they could sue the trainer for medical expenses and other damages. The financial and legal impact on the personal trainer would be severe for two reasons: First, while the amount of money might not hurt a large corporation much, the average personal trainer is likely to take a big hit. And second, personal assets are potentially on the line for sole proprietors or standalone individuals.
That’s right: In the event that you lose a lawsuit, everything from your personal checking account to your home could be fair game.
Your business classification affects more than just how you file your taxes. Many freelancers provide services under their personal name and operate outside of a legal entity. This is also known as sole proprietorship. However, individual freelancers can choose to operate as a company — usually, as an LLC.
LLC stands for limited liability company. The name says it all: an LLC is its own legal entity and is absolutely critical to separating an individual’s personal assets from their business debts and other liabilities.
This separation better safeguards those assets in the event damages are sought against them by a client or other party. You can think of LLC status as a barrier that helps protect your house, car, and other valuable possessions in the event a lawsuit is ever filed against you as a freelancer.
The benefits of operating as an LLC go beyond personal asset protection:
As you learn about forming an LLC, you’ll probably come across information about S corporations and C corporations, commonly referred to as S corps and C corps. An LLC can have an S corp or C corp status, which is a type of tax classification. Although single-member LLCs are, by default, taxed in the same way as a sole proprietorship, an LLC can also choose to be taxed as a C corporation. For some business owners, this may result in tax savings.
C corps pay corporate income taxes, whereas S corps are “pass-through” entities. This means the company’s earnings, losses, and deductions pass through to the individual owner (or owners). The benefits and drawbacks of S corp or C corp status vary from business to business, but the details and setup can be complicated. After you’ve taken the first step to form your LLC, a financial advisor or tax professional can help you determine which classification is best for your business.
As you decide whether you should incorporate as an LLC, here’s a quick list of the pros and cons.
The Pros of Forming an LLC:
The Cons of Forming an LLC:
Every state has its own guidelines and requirements for LLC incorporation. You can learn more about them from your local secretary of state’s website, or in the ZenBusiness guide to LLC formation. If you’re not using a business formation service like ZenBusiness, you’ll want to read up on specific state laws before starting, including how to remain in good standing over time. In most cases, you can form an LLC in five steps:
Although the benefits of forming an LLC are clear, many freelancers don’t have the time or patience to set it up themselves.
To get the benefits of an LLC classification without the headaches of wading through legalese, scrambling for deadlines, and risking non-compliance, ZenBusiness offers turnkey business formation plans with different options to meet your individual needs.
Basically, ZenBusiness makes the process super easy and convenient. You can do it all online without all the tedious paperwork… and now the starter package starts at $0 plus state fees!
Founded by a team of passionate entrepreneurs in 2015, ZenBusiness now helps over 150,000 LLCs in all 50 states, including about 50,000 freelancers and consultants — many of them Freelancers Union members!
ZenBusiness makes it easy to start, run, and grow your dream business. Along with their formation plans, ZenBusiness offers tools, guidance, and expertise to help you be the best boss you’ve ever had.
Have questions? The savvy and super-responsive team at ZenBusiness can help. Contact ZenBusiness today or check out their FAQs.