Why YOU Should Become a Business
12 Comments March 26, 2007 / Posted in Business Development
I’ve received a few questions lately about how my web development business, infinFX, got its LLC and why we chose to go that route.
A limited liability company (LLC) is a form of business entity that is separate and distinct from a person, like a corporation. The LLC is often described as a hybrid between a corporation and a partnership (or sole proprietorship).
For a small business, the main advantage of registering as an LLC instead of as a corporation is that you are only taxed once, since it is considered the owner’s primary source of income. Of course, once your business is registered, as either an LLC or a corporation, you now can write-off the tax expenses of items such as company lunches, computer equipment, and gas mileage, if they are used in the service of the business. By subtracting these expenses from your profits, you will now owe less in taxes.
An LLC also allows for the limited liability protection similar to that of a corporation (i.e., your risk is limited to the amount that is invested in the LLC, and personal assets beyond that are usually protected).
We registered infinFX as an LLC through IncFile.com, which offers business incorporation solutions. The cost of registering varies per the company you use, as well as your state, but the total price we paid was around $500.
Many people think that they need to see an attorney to register their business, however, this is not the case. Of course, it is always recommended that you consult the appropriate legal and accounting specialists, IncFile can take care of the filings for you and save you the attorney fees.
If you have ever seriously considered working part or full-time for yourself, I highly recommend you register your business as an LLC.
Matt Blancarte
Josh Mullineaux
That’s a very interesting post. It’s always the practical things like this that people are interested in but there doesn’t seem to be a lot of advice for, particularly for freelancers or entrepreneurs. I’ve been wondering lately if I started a blog network and started charging for advertising directly with small businesses, should I get a business entity together rather than just be ‘me’ as it were. It would certainly give some credibility to the business as well.
also . . . remember all the business licenses and state stuff you have to do. It can take a while some times. I asked my friend who just graduated law school to take a look at everything for me just to make sure i did everything right . . .
I highly recommend getting your online business registered. You are right — it certainly does add some degree of credibility. I have noticed that clients have taken myself more seriously once they find out our business is licensed.
If you’re ever going to start a small business, you should always consider forming an LLC. There is really no reason not to. The time that it takes is not too long (it probably will take longer to find your state’s form online than to fill it out). Also, many of the services that do it for you are nice, but they are by no means necessary. Most states make it easy enough to do everything on your own. Also, the expense is not too great - especially in certain states like Delaware or Nevada, and definitely worth it because of looking professional to customers as well as protecting you from liability should anything like that happen. There is really no substantial reason not to!
We just recently got LLC’ed and the process was rather painless. All in all, it took us less than 3 weeks to get all the paperwork filed and complete. I highly recommend it especially for any internet business. What sucks is that CA is one of the worst places to do it in since the fee’s are so high (800)!
At what point should a web business incorporate? Certain income level? I’ve played around with the idea but everytime I can’t justify the cost vs. benefit.
If you have a business, you should register it, flat out. You will save money on taxes each year. As far as incorporating, which is different from just registering, the main reason to incorporate is if your business is getting funded by investors.
Well said, Bri!
A good rule of thumb for deciding whether to incorporate is that your business is pulling in at least $200k a year. Then it’s time to take a serious look at incorporating.
I think the question should why you should build a business and not be in it..
There is not a “Rule of Thumb” dollar amount to consider in order to incorporate (although it is more advisable the more money you are taking in, generally, for reasons that will soon become clear). The primary reason to form a corporation or LLC is for the limited liability protection. This means that, assuming you are operating legally through the company, then the company may be sued for any real or perceived damages, and the entity initiating the lawsuit can attack the company, and whatever assets it has. They may not, however, go beyond that and attack the personal assets of the owner(s) - house, cars, bank accounts, etc. Every business has some risk, some very minor and some very major. The limited liability protection offered by a corporation or LLC can be had for what is, for most companies, a relatively minor cost. The LLC is typically the simplest business type (less paperwork) and most flexible, but with a little initiative there can be certain advantages to be had with a C corporation S corporation.
Nate - we are glad you found occasion to use our service, and it sounds like you have had success. Congratulations!
Kyle J. Lavender
Managing Member
http://www.incfile.com
INCFILE.COM LLC
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