Should You Turn Your Freelance Gig Into an LLC?

Freelance writing can be a lucrative side gig. It’s also a great way to gain experience, perfect your craft, and build connections with clients while doing what you love. However, if you’re looking to turn your freelance gig into a full-time career or full-fledged business in the U.S., there are some important things to consider. In addition to how you might need to change your routine and the tools you’ll need for success, you might also want to consider turning your gig into an LLC.

Becoming a registered business in the United States might seem daunting. After all, you’re just one person. However, there are many benefits to forming an LLC — ones that you won’t get if you simply keep the title of “freelancer.”

With that in mind, let’s discuss why it’s often worth it to transform your services into an LLC and how you can go about it the right way.

What Is an LLC?

LLC stands for Limited Liability Company. As the name suggests, it is a business that has limited liability protection and pass-through taxation. It separates you, personally, from your work by treating your freelancing career as a separate business. With an LLC, you wouldn’t be held personally responsible for certain debts or liabilities your business might hold.

Whatever you put into your LLC will be what you could potentially lose. Under U.S. law, your personal assets will be protected, unlike a sole proprietorship that doesn’t separate you as an individual from your business.

One person can form an LLC. In fact, single-member limited liability companies are a common type of small business in the U.S. All you need to do is register as the owner/member in your state.

To fully form an LLC, however, you have to be committed to turning your freelance gig into a full-time business. Ask yourself a few questions about your career goals before you decide to make that switch, including:

  • Why do you want a career change?
  • Can you afford it?
  • Will it increase or diminish your passion for writing?
  • Are you willing to invest in yourself?

If you can answer those questions positively and you’re ready to go full-time with your career, forming an LLC is a logical follow-up step. Let’s look at some of the biggest benefits of forming an LLC so you can determine whether it’s right for you.

Why Should You Consider an LLC?

You might think it would be a lot of extra work to form an LLC in Texas, California or anywhere in the U.S, but that’s really not the case. The only thing you have to worry about is understanding the LLC rules in your state, as they vary. However, there are plenty of websites that will direct you where you need to go based on the requirements of your state. You’ll find links to the right forms and government agencies that can help you make your LLC a legally compliant reality.

The fact that it doesn’t have to be a headache to form an LLC is just the tip of the iceberg when it comes to its benefits. Some of the biggest perks you’ll experience as a freelance writer with an LLC include:

  • Personal liability protection;
  • Tax flexibility;
  • Few ownership restrictions;
  • Management flexibility.

The biggest benefit, however, is the credibility an LLC tag can give you from a business perspective. You have to be able to market yourself effectively as a freelancer to find viable new clients. When potential clients know you’re an LLC, they’re more likely to take you seriously as a business and might hire you for more work.

Simply seeing the letters “LLC” behind your name can make you seem more like a brand than an individual. That will help you stand out from your competition and make it easier to network with other LLCs.

What To Consider Before Becoming an LLC

Forming an LLC isn’t a “too good to be true” experience. However, there are some things to consider before you determine whether it is the right move for you and your freelancing career.

First, there are the financial considerations. Typically, an LLC costs more to form and maintain than a sole proprietorship. Some states will charge ongoing fees in addition to startup fees. If you’re concerned you won’t be able to cover those fees, transitioning to an LLC might not be for you at this time. However, the costs may be worth it in the long run once you make more money as an LLC. Do a little budgeting to see if this is the case in your specific freelancing situation.

It’s also important to have the right personality and drive. Forming and maintaining an LLC requires dealing with a lot of paperwork. Keeping your contracts organized is vital. Thankfully, technology has made it easier to do that thanks to streamlined processes, like e-signatures and editable PDFs, but it still requires some self-discipline and organizational skills.

You’ll also have to get through tax season a bit differently than you have in the past. When you’re a sole proprietor, your personal and business taxes are one and the same. As an LLC, they become two separate things. That can end up being extremely helpful as you transition to a full-time freelancing career. However, it can also require you to hire an accountant or tax professional to help you with any new terminology you’re not familiar with and make sure you’re filing correctly and writing off what you can.

Continue Reading: 10 Useful Tips to Get Your Freelance Business Off the Ground in 2022

Final Thoughts

If you’ve never considered turning your freelance gig into an LLC, now is a perfect time. Remote work is becoming more popular than ever, and it’s likely to continue to grow as technology keeps moving forward. Whether you’re a writer, designer, or virtual assistant, there’s no reason you can’t prove yourself as a legitimate business — not only by going full-time with your career but by becoming an LLC.

As long as you’re highly organized, willing to manage customers effectively, and understand the rules and regulations within your state, the benefits of becoming an LLC greatly outweigh the potential drawbacks. Do your research when it comes to your state’s rules, fill out the proper forms, and you could become a totally different type of business in a very short time.