Business entity registration

Do I need an LLC?

I’m thinking about starting my own freelance business as a writer. Some friends have suggested I should form an LLC, but I know many freelancers just do business as themselves. Under what circumstances would it make sense to operate as an LLC? 

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Answer

  1. 6 Answers

    The major reasons for considering a business entity as an LLC are personal liability, ownership and management, and taxation. This is usually the entity of choice by doctors, accountants, architects and engineers, and lawyers as they as a business entity cannot issue stock.
    If you want to limit your personal liability for business debts since assets owned by the LLC name are subject to business creditors’ claims, then operating as an LLC would be the tax entity of choice. Personal assets of the LLC members are excluded from business claims to fulfill business debts. This is important if the business ever faces a lawsuit. NOTE: If you are sued for personal negligence or wrongdoing, you will still be personally liable.
    Another reason for operating as an LLC, would be if the business is trying to raise capital from investors by inducting LLC members to contribute financing, property, or services to the business.
    LLCs are the considered choice for real estate investors because the LLCs debt is included in the basis of a member’s interest and tax losses are limited to an investor’s basis.
    LLCs offers taxation options where majority of LLCs are taxed as a sole proprietorship or partnership. However, they can choose to be taxed as an S corporation or C corporation.

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