7 Signs It's Time to Form an LLC

There's so much to think about when starting a business that you may have forgotten the most important part of getting up and running… actually  starting the business!

Many of us make our first sale or book our first client before we ever think about the actual business side of things. While that’s totally understandable because, hello, starting a business is really exciting, it can also leave you vulnerable to legal issues.

We’re big fans of doing things once, early, and correctly, to save you any hassles that can crop up in the future. If you notice any of the following signs you should form a Limited Liability Company (LLC) early on in your biz, then hop to it.

Should you file a DBA or form an LLC?

That’s a good question! In our experience, most small businesses and solopreneurs will benefit greatly by becoming a limited liability company (LLC) rather than staying a sole proprietor or forming some other kind of business entity.

Signs you’re  not  ready

Are there any good reasons to hold off on forming an LLC? Absolutely! It may be too early to decide what you want to do with your business, or you may not have the clientele or budget to form an LLC. 

1. You aren’t selling anything yet, nor will you plan to in the foreseeable future.
2. You’re not sure if this is a business you want to pursue.
3. You’re just testing the waters and seeing what services or products might stick.
4. You aren’t working with anyone else yet as a collaboration or joint venture.
5. You haven’t booked  any clients yet.
6. Your company isn’t very visible, online or offline.
7. You still think it’s “too expensive” to form an LLC. (LLC filing fees vary by state, but they range from $50 to $520. Annual fees can also cost up to $520, too. If you’re not ready to save money for these costs, you should probably reevaluate your business strategy.)

If you haven’t noticed any of these signs yet, read on. It might just be time for you to form an LLC.

Signs you’re ready to form an LLC 

Are you truly ready to make things official by turning your side hustle into an LLC? Here are some signs that yes, you are:

1. You are regularly selling at least one product or service.
2. You have clients or customers who rely on you.
3. You work with your clients or customers in person, such as at a photoshoot or at a venue.
4. You are making at least $40,000 a year in revenue (Making more? An S-Corporation filing may help ease your tax burden, but you can only elect this tax filing statusafterforming an LLC. So it benefits to form an LLC first!)
5. You would like your business to  have its own separate liabilities, credit cards, bank accounts, assets and problems distinct and separate from your personal accounts and worries.
6. You’d like to start  hiring independent contractors or employees.
7. You’re starting a business with more than one person. (By default, this is a partnership, but with an LLC, all people involved become “members” of the LLC. The LLC will survive even when partners leave, which is good news for clients!)

Get some help with all the other legal aspects of your biz

Filing your LLC is super simple and  can be done in five steps…and probably less than ten minutes online. It can also potentially save you thousands of dollars later. Trust us — take the time to decide whether you’re ready to form an LLC, and if you are, do it! 

Done filing your LLC? (Yay!) Ready to take the next steps to ensure your business is legally legit? Our Lawless to Flawless™ course can help! This step-by-step guide will get your business set up for profits in just one week. No more guessing, no more struggling with what to do next.  Enroll in Lawless to Flawless™ today and get started!