If you’re a successful blogger or a startup founder, you may be wondering if structuring your business into a legal entity can help you achieve more. Legal entities like corporations, partnerships, and sole proprietorships offer many different benefits and drawbacks, so it’s important to consider all your options. Depending on your needs, you may find that a legal entity like an LLC will strike the right balance of tax benefits and liability protection.
What is an LLC?
An LLC is a limited liability company that allows the owners to reduce their personal financial risk. There are three main benefits to forming an LLC:
- Limited Liability
- Pass-through Taxation
Once you form an LLC, the business becomes a separate entity, so your business’s debts and assets are set a from your own. Additionally, LLCs allow for you to elect for pass-through taxation. This can be beneficial, as the business’s profits will only be taxed once, with your personal taxes. This avoids a common problem known as “double taxation,” where the business’s profits are taxed before you receive income, and after you pay personal taxes on your income. In addition, if you are still looking to secure funding for your business idea, making your business an LLC can add a measure of professionalism for investors.
While not everyone will require a legal entity for their business and an LLC may not be right for you, it’s still best to be aware of your options. Check out this infographic created by Fundera below to help you decide if an LLC is right for you: