When Should I Apply for an LLC?
First off, lets dispel this notion that there is a minimum threshold to become an LLC. An owner can become an LLC at any time, and the only consideration that should be made is whether the own plans on continuing this business going forwards. Even if the owner only plans to operate the business for a limited duration, there is an option on the application to record a closing date for the entity.
From the moment an owner receives the first dollar from a client, they are now self-employed in the eyes of the state, and it is at that moment that the owner can benefit from the LLC structure.
What are the Benefits of Having an LLC?
The main benefit received from an LLC is a measure of liability protection for the owner’s personal assets. An LLC creates a small barrier between an owner’s business dealings, earnings, and debts, and their personal assets such as a house and a car. Think of it as a very basic firewall – If a client were to sue the business, the owner’s assets have a measure of protection.
Additionally, an LLC helps to legitimize an operation. Instead of having checks written out to Shelly Banks, clients can now receive invoices from and pay checks to Banks Designs, LLC, giving an owner an added sense of professionalism.
One of the other large benefits of forming an LLC is that doing so allows an owner to apply for an Employer Identification Number (EIN), which the owner can then take to a bank to use in opening a business bank account which will be connected to the EIN instead of the owner’s SSN. This business bank account can then be used as the tool to separate business and personal transactions in a very clear, defined manner.
How do I Form an LLC?
Forming an LLC is quite easy to do. Assuming the owner already has a state business license with the business name registered with the state, the next step is to fill out the LLC application often offered through the state’s official website. For Washington State, the application can be found on the Secretary of State’s website, and can be submitted via the mail or online. Simply fill out the application, pay the fee, and wait for the acceptance notice from the state.
Next Steps for My Business
Once the LLC, EIN, and business bank account are established, an owner has the base tools to help their business run more smoothly; however, there are many resources that can help as well. Cloud accounting tools have taken great leaps over the past few years, and tend to be both user-friendly and robust. Consider employing an accounting software to help organize bank transactions. Need to track time? TSheets is easy to set up and use, and plugs into many accounting software services. If there is a lot a driving required, check out MileIQ to help track business miles throughout the year. Lastly, consider paying for accounting services the same way we all pay for auto and health insurance, or a real estate agent to sell our properties. Paying an expert to help your business be less of an audit risk, as well as to provide insight and advice about your operations can save you a lot in penalties and fees.