We’re going to tackle the topic of whether or not you should form an LLC. We’re going to come at this from the non-legal business owner’s perspective and cut out all the mumbo-jumbo. 

 

Show Notes

Today, I wanted to tackle one of the big questions that I get from people all the time:

I’m a solo entrepreneur. I’ve got my own little business and I am wondering if I should form a limited liability corporation (LLC). 

Basically, the intent of an LLC, as you can tell from the name, is that it gives you the advantages of being a corporation, whatever those are. The idea is that you’re trying to separate your personal finances from this corporation. And the question is, why would you want to do that or not want to do that?

“I want an LLC so that if someone sues me, they’ll be suing my company and not me”. 

Indeed, it is true that one of the purposes of a limited liability corporation is to manage your risk around topics such as unpaid debts, legal judgments, other legal obligations of your business, liability for negligence, etc. but unlike what people think, an LLC does not magically protect you. You turn the shields on and all of a sudden the phasers can’t get you — that’s not how it works. If you do something yourself, when your company gets sued, you will also be named in the lawsuit. 

An LLC does protect you better if you weren’t personally negligent so you do enjoy some protection from the LLC, but if you wrote a blog post and you defamed somebody, for example, then you get sued for that personally even though you wrote it as your company.

“An LLC will help me pay fewer taxes”. 

LLCs that are owned by a single person are usually taxed the same as a sole proprietorship. When you are running the business as a single person, the LLC is treated as a disregarded entity. Your income is taxed as income. 

There are options that having an LLC gives you, such as being taxed as a regular CRS corporation, but there’s not a lot of tax benefit until the company gets bigger.

These are the two main reasons that people get into forming an LLC and if you’re a solopreneur thinking about forming an LLC, why should you do it as there’s cost associated with it? And depending on where you form your LLC, those costs can be significant. There’s paperwork and you will have to pay a franchise fee every year to keep the LLC maintained and on top of that, there may be state income tax implications. 

Before you go to the trouble of forming an LLC, make sure you understand the cost. 

But, there is an increasing number of situations, particularly in online business, where LLCs will help.

An example would be my personal venture of expanding our dropshipping business to walmart.com. Unlike Amazon, walmart.com will not accept you as a seller unless you are an actual corporation. It’s their way of saying that they only want to mess with serious people, and one way we can judge whether or not people are serious is whether or not they’ve actually formed a real company.

This might not always be the case but this is a perception that you generate whenever you have an LLC, and this can be useful when you’re doing business with other people. 

Another intangible benefit is that it can also help with self-esteem as people feel better talking about the fact that they’re a legit corporation.  They could say, I own this company versus just having a side hustle.

A technical benefit of an LLC that you should ask your tax provider about is the 20% pass-through deduction which, under certain conditions, when you have an LLC, you can qualify for. It allows you to deduct, for income tax purposes, 20% of the net income of your business.

Another advantage of an LLC is the infrastructure it gives you to manage employees and payroll. 

If all this LLC stuff seems foreign to you because you don’t even know where to start, I’ve created a free video resource for you here: http://latenightim.com/explain. In several short videos, I explain to you what internet marketing and what online business is all about, and the different options that you have for starting an online business.

 

Links Mentioned In This Episode

 

Help Me Help You Succeed Online

The more I hear from you about your struggles, trials and tribulations, the more I can help. So, be sure to leave comments on this post to reach out to me on Twitter or in the Late Night Internet Marketing Private Facebook Group

 

Tell Me What You Think

I’d love to hear what you think about the podcast. Better yet, Id love to answer your question about Internet marketing on the show. Just drop me a line here on the blog or on the digital recorder at 214-444-8655. Dont worry, there are no stupid questions. Unless you tell me not to, when you ask a question or leave a comment might even use it on the show.

 

Help Me Help Others

Thanks so much for your reviews on iTunes. We get a ton of exposure from iTunes, and we really appreciate the reviews there. At last count, we were over 100 reviews worldwide and counting. Reviews help us get new listeners — so I really appreciate you taking the time to leave a review on iTunes (link).

 

Get The Episode Transcript

Interested in the transcript of this episode when it’s ready? Transcripts are available to all of my subscribers. You can find them along with all the other episode transcripts and special bonus content in the Late Night Internet Marketing Podcast Vault (sounds mysterious, doesn’t it?)

TEST
Enter your name and email address below and I'll send your Domain Name Checklist directly to your inbox.

Enter your name and email address below and I'll send your Domain Name Checklist directly to your inbox.

It's the only domain name checklist you will ever need.

You have Successfully Subscribed!

Enter your name and email address below and I'll send your Blog Post SEO Checklist directly to your inbox.

It's the only SEO checklist you'll ever need.

You have Successfully Subscribed!

Enter your name and email address below and I'll send your awesome Become An ExpertChecklist directly to your inbox.

Crush Imposter Syndrome Starting Today!

You have Successfully Subscribed!

Monday Motivational Email

Yes!! Please help me stay motivated by sending me an awesome motivational email each Monday morning.

Success! Now check your email to confirm your subscription.

Affiliate Marketing Tips

Enter your name and email address below and I'll send your awesome Affiliate Tips Checklist.

More than 30 tips to help you increase commissions sent directly to your inbox.

You have Successfully Subscribed!

Join The Community!

 

Leave me your email and I will send you cool free stuff

You have Successfully Subscribed!

Sign Up To Get Notified About The Launch!

You have Successfully Subscribed!

utm parameters google analytics

Where should Isend your UTM Parameter Secret Decoder Ring?

It's the only UTM Parameter reference you will ever need, and I'll send it straight to your inbox.

You have Successfully Subscribed!

Want To Start Your Own Internet Profitable Online Business? Need Help Making It Grow?

Want To Start Your Own Internet Profitable Online Business? Need Help Making It Grow?

Just leave your email and I'll send you everything you need to get started, and helpful tips to make your business thrive.

You have Successfully Subscribed!

Enter your name and email address below and I'll send this presentation directly to your inbox.

These slides are perfectly with episodes 147 and 148.  They'll make everything crystal clear.

Your content is on the way!

Yes! Notify Me When New Late Night Internet Marketing Podcast Episodes Are Released!

You'll know when new episodes are available (and exactly where to find them).  Easy peasy.

You have Successfully Subscribed!

Yes! Notify Me When New Late Night Internet Marketing Podcast Episodes Are Released!

You'll know when new episodes are available (and exactly where to find them).  Easy peasy.

You have Successfully Subscribed!

Subscribe To Our Newsletter

Subscribe To Our Newsletter

Join our mailing list to receive the latest news and updates from our team.

You have Successfully Subscribed!