I am starting a freelance eLearning business. For those of you out there, what type of business license did you acquire? I am leaning towards sole proprietorship but also know that LLC gives you more personal asset protection. If its just me I feel like the sole proprietorship is appropriate.
Also not sure which discussion board to post this to.
The attached PDF contains an article I wrote about this topic back in 2002. It includes input from two dozen colleagues who represented a range of business types. I hope it provides some help as you consider how to proceed.
My state (MN) provides an excellent guide to starting a business that I found very helpful when I began freelancing. Of course, things vary by state. I suggest you check your state's website to see what they provide.
Finally, I'll offer what I consider important advice if you do become a sole proprietor: Establish a legal business name, set up a bank account in the business's name, and be sure you always save enough of your earnings to pay your estimated taxes (Fed & State income taxes, plus the employee AND employer FICA taxes).
You can set up an LLC, but still be taxed as a sole proprietor. That gives you the best of both worlds. Essentially, you have an LLC with a single member. The IRS ignores that, so you file a Schedule C and are taxed just like you would as a sole proprietor.
I'll add one more note: There may be some companies who will not work with a sole proprietor.
That decision is typically made because they want to avoid the risk of a contractor coming back at them with a claim that they were really an employee. In other words, they want to pay a company, not an individual (even if that individual has a doing-business-as name).
I think this has become more of an issue since I wrote the article I attached in my comment above.
So, even though being an LLC requires additional paperwork and stricter accounting practices, it might be worth it.
4 Replies
Hi, Keithia,
The attached PDF contains an article I wrote about this topic back in 2002. It includes input from two dozen colleagues who represented a range of business types. I hope it provides some help as you consider how to proceed.
My state (MN) provides an excellent guide to starting a business that I found very helpful when I began freelancing. Of course, things vary by state. I suggest you check your state's website to see what they provide.
Finally, I'll offer what I consider important advice if you do become a sole proprietor: Establish a legal business name, set up a bank account in the business's name, and be sure you always save enough of your earnings to pay your estimated taxes (Fed & State income taxes, plus the employee AND employer FICA taxes).
Good luck!
You can set up an LLC, but still be taxed as a sole proprietor. That gives you the best of both worlds. Essentially, you have an LLC with a single member. The IRS ignores that, so you file a Schedule C and are taxed just like you would as a sole proprietor.
Thank you all. This has been really helpful information.
Hi again, Keithia,
I'll add one more note: There may be some companies who will not work with a sole proprietor.
That decision is typically made because they want to avoid the risk of a contractor coming back at them with a claim that they were really an employee. In other words, they want to pay a company, not an individual (even if that individual has a doing-business-as name).
I think this has become more of an issue since I wrote the article I attached in my comment above.
So, even though being an LLC requires additional paperwork and stricter accounting practices, it might be worth it.