Business entity registration

When to form an LLC

I have been a freelance bookkeeper for almost three years now. The first two years I was still building my business. At what point should I form an LLC and what would be the benefits to doing this now or waiting?

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    Depending on how much income you are currently earning, and the types of expenses you have, it may be a good time to create an LLC for your freelance business. An LLC is a simple way to structure your sole proprietor business. As you are probably aware, this type of business provides you with limited liability with a structure that’s easier to establish and maintain. The LLC structure provides protection to you (the owner) by limiting the owner’s personal liability. Essentially, the business debts owed by the business, and any other claims on your business (such as liens & lawsuits) are limited to the assets of the business itself. (Be aware, that this protection does not extend to any illegal acts committed by the owners of the LLC.) In short, when you form an LLC, your personal assets won’t be at risk if your business faces bankruptcy or lawsuits.

    For tax purposes, the IRS treats LLCs as either a sole proprietor or a partnership, depending on whether it’s a single-member LLC or multi-member LLC. Single-member LLCs are treated like a sole proprietorship, and multi-member LLCs are treated like a partnership.

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