Perks of Creating an LLC

You’ve started making money with your side business, congrats on that! It’s always great to see your hard work pay off. Being able to build an asset that will bring you money in the future is one of the quickest ways to grow your wealth and focus on your financial future.

Often when starting your business, one of the most overlooked steps is setting up a legal entity for your business. While it may seem like a pain to do, it is crucial to set up a business entity. This is mainly so that your business is considered separate from you for legal and tax purposes. 

There are various types of businesses, but we’re going to focus the perks of creating an LLC for your business.

What is an LLC?

LLC stands for Limited Liability Corporation. The LLC was created mainly to limit the amount of liability that an owner has in running a business. 

As you know, business has its ups and downs. If you are unfortunate enough to run into any legal issues, having a separate business entity is crucial. 

Limited Liability

When you operate as a Sole Proprietor, meaning that you do not set up a legal entity for your business, you are assuming all of the risk.

That means that if something happens, like a lawsuit with a customer, vendor, supplier, you name it, If anyone sues you, your liability does not stop at the business level. Without limited liability, the person or entity suing you can seize your personal assets.

Meaning they can take your car, your personal money or even your home. These are in extreme circumstances, but it is possible.

When you form an LLC, you are given what is called Limited Liability. Which means that your personal and business assets are legally separate. If the business gets sued, you personally do not. 

Other Perks of Forming an LLC

Less Paperwork

Nobody likes paperwork and I would think one of the main reasons that people don’t file their business is because of the paperwork. When it comes to creating an LLC, there is minimal paperwork and unlike Corporations, there is no need for substantial record keeping or ongoing legal documentation such as annual reports.


An LLC is generally taxed the same as a Sole Proprietor is, so there isn’t much extra benefit there. But it is worth noting that compared to a C-Corp (another option when filing your business), you will only be taxed at the personal level. 

An LLC is a pass-through entity for tax purposes, meaning that the business profits are not taxed, only you are when the profits pass through to you on the Schedule C of your income tax return.

A C-Corp on the other hand, is subject to double taxation. Meaning the business is taxed as well as the individual shareholders. 

It’s Cheap to File

Unlike an S-Corp or C-Corp, creating an LLC is relatively inexpensive. It varies between states, but you will generally find the costs to be from $100-$500 to file your business. 

While that may seem like a lot, as your business begins to grow in both profits and in size, it will be best for your legal protection to form a business entity.


This post was just scratching the surface of choosing a business entity, but when it comes to owning your own business, it is crucial that you file your business. Having the business separate from your personal assets is the first step towards protecting your future. 

Don’t Have a Side Business?

If you don’t have a source of side income yet, it’s not too late to start! In fact, it might be the best time to start one. Check out our completely free guide running through the top 25 side hustles to start in 2020. Get it here.

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