This is a sponsored conversation written by me on behalf of CT Corporation. The opinions and text are all mine.
Lately, many members of the Make Money Your Honey community have been asking me about how to file for an LLC. Heck, even people in my personal life are asking me this question.
First, let me point out that I am neither an attorney or an accountant, so everything I’m about to say is based on my own personal experience. I do recommend seeking guidance from licensed professionals should you have any questions.
Second, although I’ve had an LLC for my business since 2013, I made some mistakes that cost me money. These are mistakes I’d like for you to avoid. I’ll share them throughout this piece so you don’t lose money like I did.
Why do you need to incorporate your business?
There are two main reasons why people incorporate their business:
- Legal protection
Taxes depend on which incorporation you choose (ex. LLC versus S-Corp). If you’re looking at an LLC, you’re considered a pass-through entity. In other words, you’re like a sole-proprietor tax-wise, but you have a legal separation between yourself and your business. There are also some other differences between an LLC and an S-Corp that makes them different come tax time, but that’s a discussion for another time.
Now let’s discuss legal. This is critical when it comes to getting your ducks in a row. Let’s say your business runs into some legal issues. If there’s no real legal separation between you and your business, they can go after everything you’ve got.
As another benefit, it also makes things easier for your finances. You have to separate your business and personal expenses anyway, and you will be asked for specific documents when you go open your business checking account.
When do you need to incorporate your business?
I started making money as a freelancer since 2010 but didn’t incorporate until three years later. That’s also how long it took me to separate my business and personal finances.
Honestly, I probably waited too long. This was partially due to the fact that there was a part of me that never thought I’d be fully self-employed someday. I saw my freelancing income as “extra money” for years. But even if that was the case, I still needed the legal protection. Going that long without it was probably not a good idea.
Furthermore, something happened internally when I finally incorporated. There was something about seeing my business’ Articles of Operation that made me think, “Oh, this is real now. I have to take this seriously.”
How much does it cost to incorporate your business?
Oh man, here are where my mistakes come into play. I didn’t really do my due diligence when I was forming my LLC and went with the first service I could find. I fell for the “Filing starting at $X” marketing and didn’t realize the process would be far more expensive. I was also automatically enrolled in an additional service which I completely forgot about (of course) and then saw the surprise on my credit card bill a year later.
Paying for an LLC isn’t the problem. I will pay good money to properly protect myself – especially when it comes to legal stuff. What annoyed me was the lack of transparency.
As for how much it costs to incorporate, that depends on what you are looking for. CT Corporation has their prices listed on their website.
Additionally, you get the peace of mind knowing that CT Corporation has 125 years of experience with legal compliance. That is not an assurance I had when I filed for my own LLC many years ago. And to be honest, it is something I freaked out about, but at the time I didn’t have a support system to talk to about these things.
What if I need to convert my business to another structure later?
This is an excellent question. Businesses change over time, so you need the flexibility to change your incorporation if need be.
I’m actually dealing with this now. About a year ago, my accountant and I started discussing converting my business from an LLC to and S-Corp because of taxes. My business was starting to expand to a point where that move would make sense. Given that my business is growing in revenue (and profit) rapidly, I might have to make this move by the end of the year.
CT Corporation is available to help me make the S-Corporation election. With their help and help from my accountant, I can make the process as easy as possible.
Do I need a business license too?
That depends on a variety of factors including what your business does, where you do business and where you live. CT Corporation can help you figure that out
Incorporating your business is an important part of running and establishing your business for the long haul. It helps you start getting organized with the finances, legally protects you and helps you start taking your business more seriously.
Have you incorporated your business yet? Is it something you’re planning on doing? Let me know by tweeting me!
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