This is a Sponsored campaign with LegalZoom. All opinions are my own.
One of the most surprising and positive economic data points to emerge in recent years is the number of small businesses. There were 31.7 million small businesses in the United States in 2017, according to the U.S. Census Bureau. Maybe you are one of those new business start-ups. Maybe you lost or left your job last year to be home with your kids when schools went remote. Maybe you decided to take some of your stimulus check funds and use them to support that great business idea you’ve always had, but never had the extra money to put behind it. Now that you’re up and running, here’s something else for you to consider: why do you need an LLC to protect not only your business but your family too.
Why Do You Need an LLC?
When I first started blogging for just my family and friends, I had everything I needed: a computer, a smartphone, and a camera were all it took to be up and running. But, when I decided to take my personal blog to the next level, to make it available to the masses, opening myself and our family up to far more people, my husband asked that I do it right. He wanted to make sure we protected our family and personal assets first and foremost. He wanted me to set up an LLC.
Your new business may be similar, requiring very little in the way of initial start-up costs. For many, it is very likely just you, offering your time and talents for payment. Whether you are tutoring or training, taking family photos or baking birthday treats, creating crafts or works of art, what may have started as just a hobby or side-hustle, soon starts to grow beyond just your family and friends. As your new, growing business starts to expand and bring you into contact with more and more people, it opens you up to more risk, and thus, the need for some legal and financial protection. Enter an LLC.
What is an LLC?
LLC stands for “limited liability company.” In the simplest of terms, it establishes your business as an official legal entity through a relatively simple business filing with your state.
The single biggest reason most new businesses pursue an LLC is for liability protection. Creating an LLC establishes your business as its own legal entity, separating you (and your personal assets like your home, retirement savings and personal bank accounts) from your business.
This means that when you take out a business loan, just your business is liable for repayment, not you personally. The same may be applied in the event your business was sued by a customer or employee.
Protect Your Business Name
As a small business owner, your brand is everything. When you file an LLC, you are also protecting your business name. No one else in your state can open a business with the same name.
Why might this matter? As your business grows, it may become a critical part of your family’s livelihood. Your brand is part of your business’ success and reputation. If you are running a restaurant as Meghan’s Cafe, and someone else opens a Meghan’s Cafe that gives all its customers food poisoning, you wouldn’t want anyone to make the mistake of leaving that kind of review on your business!
Potential Tax Savings
Initially, you may just start out as a single-member LLC. In this case, your business for tax purposes is still viewed as a sole proprietorship. You won’t have to file a separate business tax return, and you just report all your profits or losses on your personal income taxes.
As your business grows, or if you take on partners, an LLC can provide greater opportunity for tax savings. You can elect to file as an S corporation, putting yourself and employees on payroll, and creating greater opportunity for tax savings, and more profits to grow your business or save for your family.
How to Form an LLC
Now that you understand the benefits, you may be asking how you actually go about forming an LLC for your newly launched or growing business. That’s where LegalZoom can be a tremendous resource. Just like here at Family Finance Mom, I strive to make financial information more accessible for all, LegalZoom is doing the same with legal services, making high-quality legal services more accessible and affordable to small businesses and families. And it isn’t all just DIY paperwork you have to download and complete yourself either. If you need attorney advice along the way, LegalZoom has you covered across all 50 states through a network of independent law firms that manage relationships with over 1,300 attorneys, as well as in-house tax advisors.
Check out LegalZoom’s Business Formation page, where you can get started on your LLC. You can even take a questionnaire to determine what the right legal entity is for your business. You’ll also find resources to protect your intellectual property, like trademarks, copyrights and patents. Not a small business? LegalZoom also offers legal services for families, like estate planning, wills and trusts.
Legal services aren’t just for the rich and famous or major corporations. Every business, no matter the size, and family, no matter their net worth, should have access to legal services. LegalZoom makes them accessible and at a reasonable price.