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Three Reasons You Should Start Your LLC

One of the most common questions from new business owners is whether they need to start an LLC. To clarify, you do not need an LLC to "be in business." You are in business the moment you decide you want to sell something. It's really that simple. An LLC provides you liability protection in the event you or your business ends up in a legal situation. Having an LLC does not result in any immediate tax savings. Although there is really no tax impact, I still recommend an LLC for three reasons:

(1) Protection & Separation - The most obvious benefit is the legal protection you gain from having an LLC. By separating your business entity from your personal identity, you protect both from liability and gain the opportunity to establish separate credit history and financial impact in the business's name.

(2) S Corp - One of the best ways to save in taxes as a business owner is to file the S Corp tax election (once you are profitable). In order to be able to do this, you must first have a business entity (an LLC or Corp) at a state level. having the LLC gets you one step closer to being able to make this election.

(3) Mindset - When business owners tell me they have not filed their LLC yet or they are not "ready," most commonly the reason is that they are afraid of the commitment. If the reason you have been putting this off is because you are hesitant to commit to the business, really think about it. It is better to get the liability protection for the assets you have and be positioned well to grow than to be half committed. Go all in so you are dedicated to helping your business grow.

I only have one main exception to waiting to start your LLC, which you can read about here:

As always, you should consult your accountant and lawyer to make sure an LLC makes the most sense for you. I am not giving legal advice, but sharing knowledge gained from my experience.


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