If you’ve been eager to take your freelancing business to the next level by forming an LLC, there are a few things to consider before doing so. While it can be an extremely beneficial endeavour, some freelancers might not be suitable, whether circumstance or preference. One way to best understand your suitability or lack thereof of forming an LLC as a freelancer is to create a pros and cons list. Luckily, we here at Publicist have already done that for you so that you don’t have to! What follows will be a detail into the pros and cons of forming an LLC, particularly as a freelancer. It’s likely that the benefits of doing so will far outweigh the cons, however, in any case, this is your business we’re talking about so it’s important to understand what you’re in for before proceeding. With that said, let’s get right into it, shall we?!
The Pros of Forming an LLC as a Freelancer
Forming an LLC as a freelancer comes with incredible benefits that you wouldn’t otherwise experience if not for forming a company. From financial incentive to professional prosperity, an LLC might be just what you need to take your freelancing business to the next level.
While some of the following pros that follow might not be of interest to you and your business, the majority of them certainly will, notably those that pertain to taxes; hence why it’s such a popular decision amongst freelancers.
Below are the most common pros of forming an LLC as a freelancer.
Boost Your Professional Image
Gain Flexibility with Tax Deductions
Avoid Double Taxation and Other Obligations
Have Protection Against Liability
Ability to Open a Business Bank Account
It’s Simple and Easy to Do So
Because freelancing is typically a one-person show, much of the responsibility and liability falls on the freelancer's shoulders; a problem employees don’t necessarily need to worry about. By forming an LLC, however, you remove the personal liabilities attached to business operations while also relieving yourself of several tax obligations in the process. Because running your own show comes with its own expenses, getting all the savings you can get is imperative!
Finally, because of its ease to set up, why wouldn’t you form an LLC?! Well, in what follows, we’ll dive deeper into reasons why you might avert the decision to form an LLC as a freelancer…
The Cons of Forming an LLC as a Freelancer
As mentioned, forming an LLC as a freelancer doesn’t come without its disadvantages. While they may not deter you from doing so, it’s worth at the very least to be aware of.
Defining what follows as a “con” will largely depend on your preferences and circumstances. In other words, paying fees to form an LLC, for example, might not be a big deal for some, while others may not see its value.
Below are the most common cons of forming an LLC as a freelancer:
Miscellaneous Fees Associated with Opening and Maintaining LLC
Added Complexity to Business Tax
Requirements to Record Business Activities
The reason most people get into freelancing in the first place is to avoid the complexities that come with the corporate lifestyle and take on a “do it yourself” approach. By forming an LLC, however, you introduce the law on a deeper level, likely requiring additional professional help to aid in the process.
Similarly, while it’s an incredible benefit the flexibility one gains during tax season when forming an LLC, the complexities that accompany it may not be worth the headache for some.
A Final Piece of Advice
If you’re still uncertain as to how to proceed, unsure of whether or not forming an LLC is for you, there are a few questions worth asking yourself.
First, understand why you’ve ventured as a freelancer in the first place. Maybe it was to make passive income and break away from your 9-5; maybe it was to free yourself from the rat race and avoid the conflicts that come with it; or maybe you’ve found your passion, eager to grow it as large as you possibly can.
Depending on the answers to these questions will largely depict your suitability or lack thereof of forming an LLC.
To illustrate further, if you’re in it for the freedom and simplicity it provides, forming an LLC might be too much of a headache for it to be worth it for you. If you’re in it make a lasting career out of it, however, forming an LLC might just be what you need to increase ROI, save on taxes, and receive the benefits you deserve. Finally, if you’re in it to grow it as large as you can, you might even want to take it a step further and inquire about forming an S-Corp.
Only you know what’s best for you and your freelancing business. Hopefully, the pros and cons of forming an LLC as a freelancer outlined above have allowed for some clarity on that answer…
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