When to Start an LLC

When to Start an LLC

Your new business is your baby.

So let’s take good care of it from the start.

Truth be told, you probably don’t have to become an LLC. (Shocker!) You can run as a sole proprietor and not register with your state.

Keep in mind, some licensed professions like law and engineering (and other specific industries) require registration.

But there are some reasons why you may want to register your business.

Here’s how to know when it’s right for you...

The Benefits of Registering

If you don’t register your business, then you’re personally liable for everything that happens in it. That means your personal assets (like a car, house, bank account) can be used to pay business debts.

The main benefit of registering as an LLC (Limited Liability Company) is that you receive limited liability. You won’t be personally liable for your business anymore.

An LLC protects you from losing your personal assets.

The Downsides

One big reason to skip registering is to save money.

The cost depends on your state. In most states, it’s around $100 per year, which isn’t too bad.

But in some states, like California, you’ll pay $800 minimum in LLC tax per year.

So make sure you can afford it and it’s worth the risk.

You should also consider how difficult the process is to register.

For example, LLCs in New York have to publish a notice in the newspaper to become an LLC.

When to Register

Registering depends on your level of risk.

You may want to register from day one or you might be comfortable waiting until the business grows.

In the end, it all boils down to when you start feeling uncomfortable about being personally responsible for the business.

Your level of risk also depends on your industry.

It's recommended to register early if your business has a physical location or carries certain products (food, beauty, kids products) because of the greater risk of lawsuit.

All in all, consider your risk and the level of personal financial liability you can handle.

Your business, your decision.

See the LLC Checklist

You’ll learn when you need a DBA.

You’ll learn how to file an LLC step by step.

You’ll learn about business licenses, sales taxes, and s corps.

Plus it's affordable ($19) and it's everything you need to start your business legally.