If you’ve been doing well for yourself as a part-time freelancer, you may be wondering if you can make a sustainable career out of it. In fact, did you realize you can form yourself as an LLC (Limited Liability Company)?
When freelancers want to form an LLC, there are a few points you must remember, and some benefits you’ll enjoy if you follow this path.
It greatly enhances your professional reputation.
An LLC not only protects you in case you get sued, but also enhances your professional reputation. This is because if someone is searching the internet to find a business that employs freelance writers, they would see your profile as part of a larger network of freelancers. That’s great, right?
And on top of that, if they Google “writing companies”, for example, your profile might come up. It gives you a smoother financial life. As a freelance writer, it is essential that you have a bank account, ideally with access to real-time banking, to pay your bills.
Freelancers mostly deal with invoices and payment platforms like Paypal, which are useful but don’t always establish verifiable proof of income or cash flow. When you form an LLC, you can pay yourself a salary and even issue yourself pay stubs using an online pay stub maker.
You can take tax deductions for business expenses.
If you want to form an LLC, you may want to get your clients to sign the disclosure document. It is one of the documents that entitle them to tax deductions when they hire a freelancer. If you follow the advice from the IRS about how to file an accurate return, you will get tax deductions for your business expenses. Keep in mind that this is only for a freelance business.
When you run your own full-time business, you’re still allowed to use this form for expenses. One of the expenses to consider for this business form is liability insurance. You’ll get business and liability insurance that will cover your expenses. This will be in the form of an insurance bond that you sign with your clients.
You’ll be in a good position to form your own agency, in a legally clear way.
Many freelancers don’t realize that LLCs are an important stepping stone for them to enter the big corporate world. If you want to start your own freelancing agency, you can register your name as an LLC with the main business law database (there are also free business law review websites). You can do this for a limited period of time, and you can then use your LLC for that purpose.
You will still be your own boss, but you will also have the advantage of the corporate structure in a legal way.
Personal Liability Protection
One of the benefits of LLC formation is personal liability protection. When you form an LLC, you place the business into the public domain. This protects you from becoming personally liable for the actions of your business or its employees.
If your business goes bankrupt, you can’t be held liable for debts or expenses from the business. There are several states that require an LLC to protect a person as a business owner. However, the business itself isn’t covered under personal liability protection.
How to form an LLC
After you’ve determined what your interests and talents are, you should start looking into forming an LLC. When forming an LLC, you can choose between one of three options: sole proprietorship, limited liability company, or corporation. This choice comes down to personal preference.
Before you start, it’s best to research what each state requires for setting up a business. You can also search online for any requirements specific to your area of specialization.