Should I Start an LLC as a Freelancer – Business 101
Do you want to know the answer to the question, “Should I start an LLC as a freelancer?” then read on. Although you can run a freelance business effectively even without an LLC, there may come a point in your freelancing journey where you may need to establish one.
But first, you may be wondering what is an LLC anyway? A Limited Liability Company or LLC is a business structure that separates your personal assets from that of your business. This can be very beneficial, depending on your current situation as a freelancer. To help you answer the question, “Should I start an LLC as a freelancer?” there are some factors that you need to consider.
Considerations for Starting an LLC as a Freelancer
Before you start filling up forms, you may want to put the brakes on starting your LLC right away. There are many things you need to think about before you create your own company. Check them out below to help you out:
Long-Term Plans
There comes a point where it makes sense to create an LLC because it is beneficial for your income. If you are just starting out on your freelancer journey, it might not make sense to create one right away. However, if you do have big plans in your future, maybe you want to expand your one-person business, it’s okay to plan ahead.
Answering the question, should I start an LLC as a freelancer, becomes a no-brainer if you have taken the time to make projections for your future. If you want to someday earn thousands per month, it may help to have an LLC so that your taxes wouldn’t be as big and you can also get possible tax deductions for your operations.
Personal Assets
Do you have personal assets that you need to protect? Maybe you have family properties or land titles that have your name on it? If you do have such assets, you will need to protect these. And one of the best ways to get protection for your personal assets is to get an LLC.
This way, if your freelancing business takes a dip or if you have a client that may have not worked out great, there is no way your personal assets are on the line. They can only come after your business.
Residence or Citizenship
Depending on where you live or what your citizenship is, you may want to look into getting an LLC. There are several countries that allow starting an LLC even if you are a non-resident. Just make sure to check that you will be able to reap the benefits of said LLC. If you do decide to start an LLC, check out the best countries or best states to form one to help you out.
Nature of Freelancing Work
If “Should I start an LLC as a freelancer” keeps popping up in your head, it may have to do with the industry you are in. Are other freelancers in your line of work starting their own LLC? If they are, you might need to look into why.
There may be some clients who actually prefer dealing with an LLC as opposed to a freelancer. If you think you will have better chances of getting clients and booking gigs as an LLC, then this may be the right path for you.
Preparations for Starting an LLC
Now, this is not an in-depth discussion on all the requirements you will need for starting an LLC but you must at least have a bit of an idea of what you are going up against.
Paperwork
If you are having trouble keeping up with admin work as a freelancer, bad news, you’ll be getting even more paperwork if you start an LLC. However, there are agencies out there that can actually help you if you do decide to start an LLC. However, if you find that you have no patience for filling up forms, the answer to should I start an LLC as a freelancer should be an instant no.
You need to make preparations for making your own company, especially if you will start an LLC that is not in your home country or your country of residence.
Fees
Starting an LLC is not just about forms, you also need to pay fees. Now, the fee will depend on a number of things. For example, in the US, filing your LLC fee will depend on the state where you will start your company. You also need to consider other fees that may be related to starting an LLC. This can include opening a bank account for your company because you definitely can’t use your personal bank account.
Add to that, you may need to get a visa if you are a non-resident starting an LLC. It’s also important to have a tax identification number or TIN. Starting an LLC on your own can be very tricky and hard to navigate, so you might end up getting a professional to do it for you, so do add that to your list of fees.
Conclusion: So, Should I start an LLC as a freelancer?
When you take things into consideration, you should be able to answer the question should I start an LLC as a freelancer on your own. Each freelancer is on their own journey and starting an LLC may be beneficial for some while for others it’s more work but very tiny rewards.
The answer here is definitely up to you. Just make sure to consider all of the factors discussed above, from what you can gain out of starting an LLC and also if you have the capacity for registering your own company.
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