The U.S. freelance industry is growing with 59 million Americans doing freelance work now, which is 36% of the country’s total workforce. In fact, more professionals are freelancing full time now, when compared to those doing so in 2019.

Whether you’re freelancing full time or doing it part time to create a side income source, you should consider registering it as a business.

Thinking that you’re not big enough for that yet?

If you’re signing independent work contracts and accepting payments, you’re already big enough.

And the best business formation choice for independent freelancers is to form a freelance LLC.

That’s because it will help you:

  • Appear more credible and reliable.
  • Increase your chances of getting work from large companies with high-value projects.
  • Protect your personal assets if someone sues you for issues with your work contracts.
  • Potentially save money on taxes.

Perhaps that’s the reason why new business formation and Employer Identification Number (EIN) applications increased by 4.8% in Q2 2020 from Q1 2020.

It’s time to turn into a business owner. Let’s get started.

Why Should You Form an LLC for Your Freelance Business?

Out of all of the legal business entity types, why is a limited liability company (LLC) the best choice for your freelance business?

You should register as a freelance LLC because this entity type:

Is Easy to Set Up

Forming an LLC requires minimal compliance and paperwork when compared to more complex structures like a Corporation.

Allows You to Get a Business Bank Account

You can open a business bank account to keep your business finances separate from personal finances. It will make it easier for you to track your business income and keep accurate records of your tax-deductible income.

You can also get a business credit card and use it to pay for business expenses such as upgrading your laptop and buying new furniture for your home office.

Protects Your Personal Assets

When you sign work contracts under your business’ name, an LLC will protect your personal assets from any lawsuits that occur as a result of your freelance work.

You can also buy business liability insurance to protect yourself from the worst-case scenarios of doing freelance business.

Gives You More Work Opportunities

Whether you’re designing websites or writing content, having a legally-registered LLC name in place of your own name will make you look more professional in the eyes of your clients. It can add credibility to your work and help you get business from large companies.

Helps You Save Money on Taxes

As the single owner of an LLC, you will be taxed as a Sole Proprietorship by default, which means that you’ll report LLC profits and losses on your personal tax return. You will also need to pay self-employment tax (Social Security and Medicare) on your LLC’s net income.

However, you will be entitled to tax deductions on your business expenses such as travel expenses, home office rent, and equipment costs.

As an LLC owner, you can also choose to be taxed as a Corporation. However, this practice is not common among freelancers who own single-member LLCs.

Is a Better Choice Than Being a Sole Proprietor

Though becoming a Sole Proprietor is the simplest way to do business, it might not be the best fit for your overall business needs and goals. You cannot open a business bank account, build business credit, or protect yourself from lawsuits.

How to Form a Freelance Business LLC

Let’s take a look at the step-by-step process you need to follow to set up your freelance business LLC:

  • Pick a business name that is unique and relevant to your freelance business.
  • As a freelancer, you can set up a single-member LLC or you can also partner with one or more people to open a multi-member LLC.If having more than one member (owner), you need to define the roles and responsibilities of each member.Most freelancers form a single-member LLC where they are the sole owner of their freelance LLC.
  • Choose a Registered Agent for your LLC who will receive all legal mail and court documents from the Secretary of State.If you have a physical street address (can be your home address) in the state where you want to form an LLC, you can become a Registered Agent yourself.
  • Submit Articles of Organization that will include your company’s name and address, and pay the state filing fee.
  • Acquire an Employer Identification Number (EIN)/Tax ID from the IRS for paying taxes, hiring employees, and opening a business bank account.
  • Create an LLC Operating Agreement that defines the roles and responsibilities of each member of your limited liability company.
  • Familiarize yourself with state taxes and licensing

You’ll be ready to run your freelance business as an LLC owner.

This process may seem daunting at first but don’t worry. Our business formation experts are here to make the process quick, hassle-free, and cost-effective for you.

You just need to fill out one, simplified application and pay $244 as service charges to file for your freelance business LLC with the state and federal governments. It is cheaper than having an accountant or lawyer form a business for you and easier than doing it yourself.

We also offer expedited application processing at no additional cost.

Frequently Asked Questions

1. Do freelancers need an LLC?

Though it is not necessary for freelancers to register as a business, forming an LLC can help you get work from large corporations, protect your personal assets from lawsuits, and save on taxes. Therefore, you should consider forming an LLC.

2. Am I self-employed if I own an LLC?

Yes, LLC members are considered self-employed. You will also need to pay self-employment tax on your LLC’s income.

3. Do I need an EIN as a freelancer?

No, it’s not mandatory, but you will have to file your business income and expenses on your personal tax return if you do not have an EIN.

If you want to grow your freelance business and hire people to work on projects, you will need an EIN. You’ll also need to acquire it if you register as a freelance LLC or any other business structure.

4. Do freelancers need to register as a business?

It is not mandatory to register as a business but doing so can offer numerous benefits.

Registering as a business can help you:

  • Get a business bank account.
  • Separate personal and business finances.
  • Build business credit.
  • Enjoy tax deductions on business expenses.
  • Protect your personal liability.
  • Appear more credible to potential clients, especially, large corporations.

Consider forming an LLC now. It’s simple to get started with our simplified application for both state and federal filings.

5. Is it worth it to form an LLC?

Yes, it is totally worth it to form an LLC for your freelance business. Many professionals are turning their side hustle into full-fledged profitable businesses these days. And registering as a business can be your first step towards success.

Form an LLC to Start Your Own Freelance Business Legally

For all sincere freelancers, it is a great choice to form an LLC. Not only will you be better protected, but potential clients will also see you as a reliable professional running a legitimate business.

Do you need help filing for LLC formation? We’ve got you covered.

Form a Freelance Business LLC Today

Easy filing. Expedited processing. No additional cost.