Many people who wish to work independently and without the confines of a regular office job now choose freelancing as a career. In contrast, a lot of people are unclear about the legal prerequisites for freelancing and whether they need to set up a limited liability company (LLC) in order to do so.
So, is freelancing possible without an LLC? Yes, it is the answer. To work as a freelancer, you are not required to create an LLC. In actuality, a large number of freelancers operate as sole proprietors, which is the most straightforward and typical legal structure for freelancers.
A sole proprietorship is a company that has just one owner and one employee. As a result, as a freelancer, you are the sole owner of your company and accountable for all of its operations, including paying all taxes and other financial obligations. Since no additional paperwork or expenses are required to set up a sole proprietorship, running one is fairly simple and affordable.
Being a solo owner has its benefits, one of which being total control over your company. You have complete control over your schedule, clientele, and fee structures. Additionally, you have the freedom to alter your company’s structure if your needs change.
However, running a business as a sole proprietor has significant drawbacks as well. The fact that there is no formal legal distinction between you and your company is one of the main disadvantages. This means that your personal assets may be at danger if your company is sued or owes money.
By utilizing numerous deductions and credits, freelancers can lower their tax liability. You might write off costs for your home office, travel, and equipment, for instance. The cost of your health insurance premiums may also be deducted thanks to the self-employed health insurance deduction.
In conclusion, it is possible to freelance without an LLC, and many do so as sole proprietors. Even if running a business as a sole proprietor is straightforward and affordable, there are some legal and financial concerns. By utilizing the different deductions and credits available to the self-employed, freelancers can lower their tax liability.
You must do the following actions in order to establish a freelance LLC: 1. Select a name for your LLC and ascertain its availability. 2. Submit your articles of incorporation to the Secretary of State’s office in your state. 3. Obtain the licenses and permits required to run your freelance firm. 4. Contact the IRS to get an Employer Identification Number (EIN).
5. For your LLC, draft an operating agreement. 6. Open a company bank account and get any insurance that may be required.
It’s crucial to remember that depending on the state you’re in, there may be different criteria for creating an LLC. To make sure you’re taking all the required actions, you might want to speak with an attorney or accountant.