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Pros of freelancing through an LLC

Freelancing can be a good fit for lots of different types of workers. From creative professionals to people with specialized knowledge, freelancers typically have the freedom to work when and where they want, and can set their own rates. Establishing an LLC for your freelancing work has these adds the following benefits:

  • Asset and liability protection. Without an LLC, legal or financial trouble stemming from your work could expose you to personal liability, leaving assets such as your home vulnerable. For freelancers that own significant assets, liability protection is important.
  • Tax flexibility. You have more control as an LLC, allowing you to choose the tax structure that's most beneficial to your freelance business.
  • Professionalism. Doing business as an LLC, especially if you build a professional website and market yourself properly, can boost your reputation and help you attract bigger clients. Also, an LLC can provide freelancers with some structure so they do not neglect important parts of their business, including balancing the books and other administrative tasks.
  • Room to expand. If you register an LLC, you can obtain an Employer Identification Number (EIN), allowing your LLC to hire employees when you start getting more work than you can handle solo.
  • Business credit. An LLC can enable you to open a business bank account and start building business credit. This can help with growth, securing an office, or taking on bigger projects, or hiring.  

Cons of forming an LLC as a freelancer

  • Detailed business records required. Every business owner should keep detailed records, but failure to do so in an LLC can jeopardize the liability protection it provides. Similarly, problems can occur if you commingle or mix your personal and business accounts.
  • Professional help needed. Freelancers are used to the DIY approach for almost everything, but you may want to seek out a Legal Pro when you have questions about your LLC. Getting professional advice can make a big difference when it comes to making sure your LLC is run right.
  • Filing renewal requirements. Many states require LLC owners to file annual reports or pay annual fees to maintain that LLC status.  

As you can see, the disadvantages of starting an LLC for your freelance business tend to involve tasks that take up your time. Registering an LLC, however, is typically worth that investment of time since it can provide a boost for your business and protection for your personal assets.

Ways Rocket Lawyer can help:

  1. Register your business.
    Set your freelancing work up with an LLC to protect your personal assets. With a Rocket Legal+ membership, your first business registration filing is FREE (excluding state fees).
  2. Talk to a Legal Pro.
    Everyone’s situation is unique, and sometimes it pays to talk to a Legal Pro before making big decisions. When you’re signing an important contract or finally setting up your LLC, the right advice at the right time can make all the difference.
  3. Get everything legal in one place.
    From connecting with a Legal Pro to taxes to making contracts to getting those contracts signed, Rocket Lawyer has you covered. Whether you’re just earning a little extra cash on the side or have big plans for your small venture, Rocket Lawyer can set you up with everything legal, all in one place.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

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