Why You Don’t Need an LLC to Start a Business

Why You Don’t Need an LLC to Start a Business

 

What exactly is an LLC and do you need one to start your business? Whether you are beginning your business as a podcaster, influencer, YouTuber, blogger, or seller of physical products, I can help clear up the confusion on whether or not you need an LLC right away. Ready to dig deeper into why you don’t need an LLC to start a business? Let’s do it.

 

 

If you’re new here, I am a lawyer for creatives and specialize in helping business owners and creatives ensure they set up their businesses correctly and stay legally legit every step of the way. I am all about helping you find the answers you need as you set up your business, so if you’re looking for some extra support make sure to subscribe to my YouTube channel HERE. I post tons of videos about how to keep your business legally legit. Alright, let’s dig into why you don’t need an LLC to start a business!

 

Disclaimer:

What kind of attorney would I be if this didn’t have a disclaimer? I’m a licensed attorney and I practice in Utah and Idaho. I am not your attorney. This is not official legal advice. If you have any questions, please consult with a legal professional in your jurisdiction.

 

Why You Don’t Need an LLC to Start a Business

 

 

 

LLC Truth #1: LLCs are not legally required to start a business.

 

Contrary to popular belief, there is no one who is going to make you set up an LLC. In fact, the IRS doesn’t care, and neither does your state or federal government. The IRS considers you a business if you make more than $600 in one year. While they do not care if you file as an LLC, the IRS does expect you to pay your fair share of taxes when the season rolls around. 

 

While your state doesn’t care if you set up an LLC right away, it most likely requires you to set up your DBA (doing business as) under a name that is different from your own name. For example, my name is Brittany Ratelle, and my business name is Brittany Ratelle LLC. 

 

Again, it is OK if you have not set up an LLC for your business. Just know that if you have not, you are what’s known as a sole proprietorship. This is like the default to a business if it has not classified itself as anything else. 

 

LLC Truth #2: There are additional costs when filed as an LLC.

 

In most states, the filing fees for an LLC range between $80-$300. When you become an LLC you’ll notice that you will need a little more support in making sure you correctly file your taxes, maintain your bookkeeping, and deduct your business expenses. If you are an LLC, businesses that offer these services will most likely charge you more simply because you are an LLC.

 

Just to put it in perspective, the cheapest business setup is a sole proprietorship, then LLC, then S Corp, and last would be a C Corp or non-profit. As you move your way up the business ladder, there are some benefits to each one, but be aware of those additional administrative costs as well.

 

 

 

 

LLC Truth #3: An LLC is there to protect your assets. 

 

Think of your LLC as a fence that separates your personal money and your business money. This fence protects you from losing any of your personal assets should something go wrong. If for some reason your LLC goes under, it’ll just be your business while all of your personal assets stay protected. 

 

If you don’t have a lot of liability or assets in your business, it may not make a lot of sense to start an LLC right now. Depending on your type of business, you could have a low-level or high-level risk when it comes to having or not having an LLC. However, if you’re just starting out, do not feel the pressure to get an LLC right away. 

 

 

LLC Truth #4: There are other tools out there that can protect you other than an LLC. 

 

There are several other resources available that you can use to protect your business. Two of the tools are contracts and insurance. These two plus the LLC option create an overlapping umbrella of protection for your business. 

 

Oftentimes new businesses start with one of these tools for their protection and then they layer on more as they continue to grow and get more assets. Some of the most important types of contracts you can have in your business are the ones that protect your revenue streams. These include:

 

• Client Service Agreement 
• Independent Contractor Agreement
• Website Legal Docs 
• Vendor Agreement 

 

Contracts are an easy and straightforward way to set up boundaries in your business–especially between you and hired workers and the people you are offering services to. You can check out my Creative Contracts shop HERE to learn more about which ones would be a good fit for your business right now. 

 

 

LLC Truth #5: An LLC does not save you taxes. 

 

Having an LLC does NOT save you taxes! This is a huge myth that I want to bust right now. Again, the IRS does not care if you file as an LLC or a sole proprietorship. It will still come down to you deciding and making a record of what classifies as income and deductions from your business. 

 

I will mention that if you are making more than $60 thousand per year then it is time for an S Corp. I recommend talking to an accountant to see if an S Corp is right for you. Filing as an S Corp is a tax designation. The easiest way to do this is to sign up for an LLC and then to be taxed as an S Corp. You can check out my post HERE to learn more about whether or not an S Corp is right for your business! 

 

 

Bonus Truth: When you should become an LLC.

 

Even if you are just starting out, I recommend becoming an LLC if you are in a business partnership. Setting up that LLC will protect you, your entity, and your legal liability, which is all SUPER important. 

 

I also recommend getting a written operating agreement. This agreement should discuss how decisions–big and small–will be made in your business. And if someone wants to leave the business, what is the exit plan? All of this should be decided, written out, and signed by every partner in the business. If you’re needing a template for this written operating agreement, check mine out HERE. 

 

 

 

Why You Don’t Need an LLC to Start a Business

 

If you and your business are ready for that next step, set up your business as an LLC in your state. Remember, having a business is all about managing risk. And don’t stress too much about that because I’m here to help empower and educate you so you can make informed decisions about keeping your business legally legit. 

 

Alright, if you liked what you learned here and want to know more, be sure to follow me on Instagram @brittanyratelle and subscribe to my YouTube channel HERE! 

 

 

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Interested in working with Brittany for one-on-one legal services? Sign up for a 15-min phone consult at brittanyratelle.com/services.

 

Want an attorney-drafted, industry-tested legal template for your business? Take a free quiz and find out exactly what you need for your creative business at creativecontracts.co.

 

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