Do I Need An LLC?

A question I get a lot is: “Sarah, do I need an LLC?” 

My answer is always the same: YES! A Limited Liability Company (LLC) is my favorite business entity for online business owners, no matter what stage of business you are in. 

There are several advantages to an LLC, especially for smaller businesses. One of the main draws of this type of legal entity (versus a sole proprietorship or partnership) is that  an LLC offers protection for personal assets in the event of a judgment against the business.

This means *if* something goes wrong, your personal assets are separated from your business assets. So if you were to receive a judgement against you, it doesn’t mean you lose your house, your car, or the literal shirt off your back - they can only go after the business itself (i.e. your business bank account).  

An LLC  protects you and your livelihood if you ever have a client dispute that results in a lawsuit.

Another main benefit of establishing an LLC is that you longer need to use your own social security number to get your Federal Tax ID number (EIN). Then you can use the LLC and EIN to open a business banking account. This separates all financial information for the business from your personal social security number. 

My suggestion is to incorporate under either your name or a fairly generic name so you can still keep the same LLC, even if you decide to change course in the future. This will save you a lot of headache if (like many) your business and or service offerings change over time. 

It usually is not very expensive to establish your LLC, and you can do it all online! I’ve seen costs ranging from $100-$1000 depending on the state you live. Just Google your state + set up LLC and you should find everything you need through your Secretary of State website (or similar). 

 Okay. So when should I incorporate my LLC? 

This is a tough decision with differing views. Some elect to wait as long as possible to avoid spending money and to ensure the business is viable, and some believe it’s better to establish an LLC to ensure legal protection ASAP.  

In the online business world, things can change at the drop of a hat – it’s always better to be ready rather than kicking yourself for not preparing earlier!

As an attorney, I always advise people to incorporate ASAP after they have a viable business going. But, make sure you have all of your other legal foundations, such as contracts and website policies, in order before taking on clients. Incorporating your LLC is a very important step that should be done as soon as possible, but so long as your contracts and foundations are iron-clad, you can earn money without it. 

Have questions on this or want to chat? Comment below!

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