Signs It’s Time To Form an LLC

Signs It’s Time To Form an LLC

A Limited Liability Company is the simplest business structures available, and it’s also flexible. There are tax benefits such as pass-through taxes, and you also gain limited liability (as the name implies). Your personal assets are legally protected as well.

Since the introduction of the new tax act recently, there are even more advantages for LLCs in many ways, at least in certain industries.

We’re at an interesting time right now as well, with more and more people venturing out on their own to become self-employed, solopreneurs, freelancers and contract workers.

This leaves them with the question of when it’s time to form an LLC. So how do you know the time is right?

Signs the Time Isn’t Right

While there are a lot of benefits to forming an LLC, it’s not the right time for everyone.

A few examples of people who don’t need to worry about it right now include if you’re just starting out and you’re not ready to sell products or services yet, or your visibility is extremely limited. This can refer to online and offline visibility.

However, the situations where it’s not right timing-wise to form an LLC are few and far between.

Basically, the only time it’s not best is when you’re still in the concept phase of a new business, or not very far out from that point.

Are You Earning More than $40,000 In Annual Revenue?

It’s so important for entrepreneurs and self-employed people to understand that forming an LLC is very advantageous when it’s tax time. If you’ve just shifted from being an employee to working for yourself, and you haven’t paid your taxes yet, it can be a bit of a tough pill to swallow.

As an employee, your taxes are typically automatically withheld, so you’re not necessarily paying attention to what’s coming out.

When you’re self-employed, a contractor or not working for someone else you’ll see front and center how much your taxes are, and forming an LLC can help ease the burden.

Do You Need Accounts Outside Personal Accounts?

When you first start operating as a contractor or entrepreneur, you may find that it’s fine to use just your personal accounts and credit cards. As your business grows, that can be problematic.

You need to protect yourself by ensuring your business is on its own regarding liability.

If you do face issues with your business and you’re relying on your personal accounts, it can be incredibly problematic.

Finally, do you want to grow? Not many business owners work without the objective of having sustainable, profitable growth. Growth is a key component of owning a business or being self-employed. In order to manage that growth, you should think about forming an LLC.

If you want to hire your own contractors or employees, you’ll need to work as an LLC, and if you plan on working with someone else through a partnership, it’s another sign that it may be time to go ahead and create the LLC you’ve been considering.

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