While I'm no expert, I’ve spent many hours researching this stuff, and I want you to do the same. Obviously we aren’t lawyers, so everything we’re going to discuss on this topic is from our own personal experience.
When Sarah and I first started coaching online, we continued to run our business as a sole proprietorship.
And while that’s the simplest business structure you can have, it also offers no protection if your business were to get sued.
For this reason we chose to create an LLC.
LLC stands for Limited Liability Company… and that’s exactly the point, we wanted to setup a business entity so our liability was limited.
However, one important thing to keep in mind is you can still be held liable personally for damages if your LLC gets sued if you’ve broken what's known as the 'corporate veil'. For example...
As long as you keep everything separate, pay your taxes, file your annual or quarterly reports, you should be fine 😉
Sounds like a lot of work, right?
It is, but it’s worth it to keep yourself and your personal assets safe.
We actually waited a couple years to form an LLC because we didn’t have much to lose. We had lots of debt, no house, no kids, no car, no huge savings. But once we started getting traction in our biz, paying down debt, etc, it was time for us to create an LLC and reduce our personal liability.
For years we actually had to put money into our businesses account just to make all the payments… very exhausting!
Our business today is an LLC, we have a separate business bank account, business credit card, we use Quickbooks to manage our accounting, we pay ourselves through Quickbooks Payroll, and pay taxes every quarter.
If you do want to go the LLC route…
The most time-intensive part is researching your own state filing requirements for an LLC, as well as your city requirements for a business license.
There are lots of online services that make this part easier. We personally have had great luck over the years with Northwest Registered Agent. They’ll help you with your filing and anything else your local government needs.
Click Here to see a detailed guide for creating an LLC in your home state.
As for taxes, if you form a single member LLC you would report them using Schedule C on your personal income tax return. We opted to file Form 2553 are are treated as an S Corp, to learn the difference I recommend reading this article on Chron.com.
Hope this helps!
Questions? Leave them below...