5 Reasons to Start a LLC

A Limited Liability Company, or “LLC”, is a popular option for starting a company as a creative or entrepreneur. LLCs can be a great way to protect yourself and set your business up for growth. Here are 5 reasons to take the next step from sole proprietor to LLC.

1)       Your product is in development or ready to launch.

If you’re ready (or almost) to share your designs with the world, sell your product, or release your project, you should think about how to protect your intellectual property and your brand. If you own a LLC, your company can own the rights to your trademarks and copyrights and you can separate personal liability from your business. This builds value in your company and protects your brand. You don’t want activities of your business and claims that result (like lawsuits) to spill over to personal assets and vice-versa. More on Copyrights and Trademarks.

2)       Your clients are more likely to hire you.

Owning your own company adds a level of credibility to your business. It shows you are serious. If you’re a consultant, producer, or designer and your clients are international corporate companies, you may be asked if you have loan-out company when it comes to getting paid or if you have insurance. Sometimes, having an LLC with a sleek website and branded invoice can make it easier to justify charging the rates you deserve.

3)       You are partnering with a friend or collaborator.

Collaboration can be one of the most thrilling parts of being a creative, but when things go left - it can be messy. There are several ways to structure a collaboration, but an LLC is one of the most common.  It is always best to put things in writing, especially when working with friends, when all is well so that if circumstances change, you have a roadmap for what to do. For an LLC, this roadmap is called an Operating Agreement. It sets forth expectations and how to deal with challenges providing a strong backbone for your company and your partnership’s future. More on healthy relationships in business.

4)       Money is coming in.

This is a great problem to have! If business is steady and growing, you may start to bring in increasing revenues. LLCs provide tax structure options that are beneficial for small business owners. Income tax isn’t taxable to the LLC. Unlike a corporation that pays both taxes as a business and its owners as individuals (double taxation), income flows to the individual owners of the LLC and is considered part of their personal income so you don’t have to file two separate tax returns. Consult an accountant for more advice on the best way to structure your company.

5)       Your team is growing.

This is an exciting stage for your company. You have enough work and cash flow to bring in help and grow your team. This means more responsibility– to your team and to the state. Hiring contractors and employees through an LLC limits your risk as an owner and makes the administrative side of being a boss much easier. When you employ others, you also become responsible to the Department of Labor for meeting their requirements as an employer. Your company can also apply for necessary insurance policies.