LLC NOT REQUIRED (To Start Your Online Business)

Forming an LLC is not required to start your online business. Today I'm going to be sharing with you the five main reasons you should not be starting an LLC for your online business just yet.

 

Listen, a lot of you out there want to get your legal house in order. You want to protect your business. You want to get things in order, and forming an LLC may be the first thing that you want to do if you're going out to start your online business, but I'm here to tell you that forming an LLC is right for some people, it's actually right for a lot of people, but there are some people out there that forming an LLC is not the thing that you want to do right away when you're just getting started.

The LLCs are not the end all, be all of everything related to online business. There's lots of reasons why you might not want to start an LLC just yet. Listen, here's the deal. A lot of the information that's out there is either too generic, it's too complicated, or maybe you understand it, but you look at who's producing it and you're like, “Who is this quack that's doing this video on LLCs? They don't know what they're talking about.”

There's a tremendous amount of money, time and effort that's at stake if you get this wrong. Choosing when and how to set up an LLC, this is a big legal decision. This is not something that you should just go online and do without giving it any thought whatsoever. I can't tell you how many times people come in to see me because they've made mistakes that could have been easily avoided if they'd just gone to see a lawyer from the beginning.

These are mistakes that will cost thousands of dollars to fix. Nobody wants to spend thousands of dollars on a lawyer. I'm a lawyer, and I don't want to spend thousands of dollars on a lawyer. We're going to get out of here, because I'm getting a little stuffy in my office here. So let's take a walk.

Why You Should Not Start an LLC #1 – You're Aren't Making Any Money

Let's start with reason number one that you may not want to start an LLC for your business, and it's pretty easy. It's basically that you're not making any money yet. If you're not making any money yet, you definitely don't need to start an LLC, because frankly, you don't have any money to pay for it anyway.

Why You Should Not Start an LLC #2 – You're Aren't at Risk

Reason number two that you don't want to start an LLC just yet is that you're not at risk of getting sued. You don't have to worry about anything, because nobody's going to sue you for anything. You don't have a reason to form an LLC. That's the big reason why people start LLCs to begin with. They want to make sure their personal assets are protected from some sort of lawsuit that might happen. And if you're not at risk of getting sued, then there's really no reason to start an LLC to begin with.

Why You Should Not Start an LLC #3 – You're Covered by Insurance

Reason number three kind of goes along with this. If you have insurance in place that's going to help you in the event that you do get sued, you might not need to form an LLC. Now this comes into place a lot of times when you're dealing with landlords and people that own real estate. There's always the question with real estate, do you form an LLC, do you not form an LLC, and it really just depends on personal situation, how many rental properties you own, things like that. But if you're in a business where you have some sort of insurance in place that you don't need to worry about getting sued, then you might not need an LLC.

Why You Should Not Start an LLC #4 – There is No Tax Benefit

Number four is kind of tricky here, because it's a big mistake that a lot of people make when they're thinking about forming an LLC. They want to form an LLC because they think there's some sort of tax benefit to forming the LLC, when in reality, there is no tax benefit to forming an LLC. You can actually operate as a sole proprietor and file a Schedule C with your 1040. That is going to give you the same tax benefits that you would have if you were forming an LLC.

Number four was essentially kind of the trick question here. It was because there's no tax benefit to forming an LLC. If you're thinking, “I'm going to start an LLC because I'm going to save money on taxes,” that is a bad thing to think about. It's not going to work. That's just not the way it works.

There's no tax benefit. You could be an LLC or a sole proprietorship, your taxes are going to be exactly the same. An LLC is all about liability protection. It has nothing to do with saving money on taxes. Now, you can start a business to save money on taxes, but the fact that you form an LLC has no bearing at all on how much you're going to pay in taxes at the end of the year.

Why You Should Not Start an LLC #5 – It's Just Too Complicated

The fifth reason why you do not want to start an LLC is because it's just too complicated for you. If you're having a hard enough time trying to figure how to set up your business, get clients, set up a website, blog, do some YouTube videos, all these things, if you're doing all that and you're just going to try and throw an LLC on top of it… Wait until you get some clients coming in the door. You don't need to do it right away.

Now, if you've got a lot of money to spend and you want to do that, by all means, go out and hire a lawyer or do it yourself. But if you don't think you can do it yourself and you don't have the money to spend hiring somebody to do it properly, don't waste your time or your money doing an LLC just on your own, without any help, because chances are you're probably going to mess it up. You're going to do it wrong. At some point down the road, it's going to come back to bite you. You don't want to do it that way.

So at the end of the day, when you're starting your online business, you really want to make sure that no matter what you do, you've got good advice that's helping you get to where you need to be.

Regardless of whether you decide to go with an LLC or not with an LLC, or with a corporation or not with a corporation, or any type of business entity at all, or just stay as a sole proprietorship, that choice is up to you. And really the most important thing you need to do is make sure you're informed, make sure you've got all the facts, and make sure you know what's going to work best for you in your particular situation. That's all you can ask for. And then you make the decision and you move on.

At the end of the day, as long as you can sleep better at night and know that you're protected in the way that works best for you and your business, you're going to be all set. We'll see you next time!

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Hawthorn Law is a Document Filing Service and CANNOT provide you with any legal or financial advice. The information provided on this website is designed to provide information in regards to the legal aspects of online business. However, it is presented with the understanding that Hawthorn Law is not engaged in rendering legal, accounting or other professional services. If legal advice or other professional assistance is required, the services of a licensed attorney, tax professional or financial advisor should be sought.