In today's video
I'm going to talk to you about whether you should set up an LLC as a freelancer
So you probably clicked on this video because you are a freelancer and you want
to learn a little bit more about whether an LLC is right for you
Hey, my name is Andrew I'm from Mollaei where we help entrepreneurs
Just like you start your businesses without dealing with the complicated legal
forms our done for you
Service is backed by over 2050 five-star Google reviews
and we can help you start your business too. I am a recent law school graduate
I recently took the bar. Now I'm awaiting my results. And in the meantime
I'm helping entrepreneurs just like you start your businesses too
So the question is
should I form an LLC as a freelancer?
Given the benefits in LLC can provide you as a freelancer and the minimal
resources required to set up and maintain an LLC
There are some very good reasons to consider the LLC model for your
freelancing business, LLCs protect your personal assets
The name itself describes the LLCs biggest advantage to you as a freelancer
all limits your personal liability
Here's why this is so important when you began freelancing without
any formal business structure in place
the government treats your business as an extension of yourself
That means that you are fully responsible for paying your freelance business
taxes on your personal tax return
This is the easiest way to get going
but you do open yourself up to risk. For example
you run into any legal trouble. Your personal property is at risk
This includes
but it's certainly not limited to personal and jointly owned assets
like your car, your home, or other real estate and investment portfolio
These are some examples. In other words, these assets are at risk
even though they are not associated with your freelance activity and
LLC puts up a wall of protection between your personal assets and
liability
Your freelancing business might face generally speaking LLCs offer
the same level of protection for company owners as the more traditional
corporation model. However
the requirements of setting up and maintaining an LLC
don't come close to those required
Any corporation LLCs are simple and straightforward to set up
and inexpensive to maintain the biggest deterrent for a
freelancer or any business owner
For that matter to formally set up a corporation is the cost and operational
burden. Corporations are expensive
They require initial and quarterly filings with the government
They require board and shareholder meetings
They trigger both corporate taxes and payout level taxes
They require record keeping company minutes. Bylaws. The list goes on
setting up a corporation for a single freelancer seems difficult to justify
but here's why an LLC makes perfect sense. When you form your LLC
you file your articles of organization or your state's equivalent with the
government. And that's about it
The fee to submit your articles of organization is nominal
It differs by state
You will most likely create an operating agreement to set the basic rules for
how your freelancing business will be governed. Things like distribution rules
voting rights, and new owners in many States. However
you don't actually have to file it
Corporations have a reputation for being expensive and rightly so
LLC is on the other hand offer many of the same benefits at a much
lower cost LLCs offer flexible tax benefits
Since the LLC has been in existence for quite some time
you may be familiar with its personal protection
low costs and ease of operation
While these are great benefits to you as a freelancer, they don't do the LLC
The justice, it deserves the LLCs
Flexibility allows you to mix and match benefits from various business forms in
to a custom bundle that suits your needs
And a good example of flexibility is tax treatment
When you initially set up your LLC
you will elect one of two forms of taxation
The first one is passed through taxation
Your freelance business earnings will be taxed like a partnership
In other words, the business itself won't pay any taxes
Rather the taxes are passed through to you as a business owner and paid on
your personal tax return
And the second one is corporate taxation sometimes referred to as double
taxation. Your freelance business will pay the corporate tax rate
but you also personally pay taxes on any wages or distributions made to you
as an employee and or owner of the LLC
I'll seize actually allow you to mix corporate and partnership tax structures
to take advantage of perks from both models. For instance
assuming your business needs all the requirements for S-corp status
If you are a single member, freelancer business, you most likely need this
You can actually elect to be taxed as a corporation and then an
S-corporation
This provides a tax benefit mix of corporate and partnership tax
In the end, you bypass the initial corporate tax
but only pay capital gains rates on the pass through tax at the personal level
this tax structure arrives while still only having to meet the LLC requirements
from a reporting standpoint
a perfect mix of ease and tax beneficial treatment
Now, while LLC rules are generally broad and flexible
the number one place to a misstep is taxes. As mentioned earlier
you have the flexibility to mix corporate and partnership tax models
within an LLC structure. The guiding principle is no the tax structure
you have elected and pay your taxes accordingly. If you have any doubt
seek an expert's advice to sum it all up as a
freelancer, it is recommended that you set up an LLC
an LLC will provide you with the main benefit
which is personal liability protection
and also provide you with a tax benefit
It will also provide you with tax benefits and LLCs are easy
and straightforward to operate as a freelancer
You work with all kinds of people from all around the world
and it's important that you take the right steps to protect
yourself and your personal assets
If you have any questions about anything that I talked about in today's video
click the link in the description box below to schedule your free consultation
with a trained expert who can help you determine whether an LLC is
right for your freelance business. And if you haven't already
please make sure you hit the like and subscribe button
So you don't miss out on any future videos. It's time to invest in yourself
It's time to rise