A freelancer may be a contractor, a consultant, an entrepreneur, or any other self-employed person. There are a number of advantages to being a freelancer. You can choose your own hours and you don’t have to deal with the paperwork that comes with employment. But as a freelancer, you should know that there are disadvantages as well.
In some states, freelancers are not protected as well as those who work for an employer. This is why it is important for freelancers to take steps to protect themselves from legal issues. Here are five reasons that freelance workers should form an LLC today!
What is an LLC?
An LLC, or limited liability company, is a tax-exempt legal entity. An LLC is a type of corporation that consists of owners or members who are also investors. An LLC can operate as either a business or a trust. An LLC can be a nonprofit and pay no federal income tax. An LLC can provide employees with a separate identification number, separate social security numbers and separate medical insurance.
An LLC can use its money to finance new business ideas and invest the money in securities. An LLC can own or lease real estate in all states.
You can pay yourself a salary
If you want to be considered an “employee” of your own LLC, you can pay yourself wages for your work. If you have a high number of customers and or clients, it may be difficult for you to organize all of your project invoices into a paper trail that establishes your income. But if you pay yourself a salary from your LLC, you can use a paystub creator to give yourself a weekly paycheck.
You can protect your work and assets.
There are a number of rights that you are protected by as a freelancer, such as the right to refuse work if you don’t think that it’s up to your standards or that the project is unreasonable. However, as a freelancer, you are still an individual who can be sued by others. So if you are looking for greater protection, forming an LLC is the best way to go.
The protection and the ability to do what you want with your assets is also part of the reason why individuals decide to form an LLC. You want to safeguard your future and make sure that you don’t have to pay others money if they’ve not earned it. You can have ownership of the work you do. An individual, even as a freelancer, is an employee in the eyes of the law.
You can take advantage of certain tax benefits.
All employers are required to withhold payroll taxes and pay them to the IRS. However, freelancers are not required to do the same thing. This is why it is important for freelancers to take advantage of the tax benefits that are available to them. For example, if you have a side job or earn a living doing consulting, you should consider an LLC. An LLC allows you to get an Individual Tax ID number.
This makes it easy for you to send your money to the IRS and the state in which you live. Tax-deferred retirement accounts are another benefit of LLCs. This means that you can invest in the company in an IRA or in a 401K or 403B plan, all of which are tax-deferred. The money that is invested in the company is not taxed.
You can limit the liability of any business activities you are involved in.
As a freelancer, you don’t have the benefit of being employed by a company or signing a standard contract. As a result, you are liable for your own actions and therefore you should be aware of the liability you face when you start any business. However, if you are a contractor or a consultant, you can sign a limited liability agreement with your client, limiting the liability of your actions.
There are tax benefits of forming a limited liability company. If you are a freelancer and the nature of your work is to conduct business out in the open, forming an LLC is advantageous for the taxability of your income. As a result, you will be able to receive the benefits of itemized deductions such as deductions for interest paid, as well as business expenses.
You can negotiate better rates and appear more professional
As a freelance worker, you will work with a number of different clients. To give yourself the best advantage when negotiating rates and working with clients, it is important that you form an LLC. This allows you to pool all of your finances and be taxed only on what you earn. As a freelancer, you will also have access to more financial resources.
This means that you can save for emergencies, take a class in a subject that you are interested in, or even use the money to travel! You can create a private limited liability company (LLC) and use it to do these things.
You can have more professional clients If you are hired to write an article for a national online publication, for example, it’s likely that the author of the article will own the copyright.
