5 Reasons You Should Set Up an LLC for Your Online Business – And How to Do It

You’ve started your online business, whether you’re selling digital information products, creating and offering courses, blogging, putting up videos on YouTube, “influencing” on TikTok and/or Instagram, or whatever other venture you’re involved in…

The money is coming in and the business is growing… awesome!

But now that your once little start-up is growing (up)… you’re dealing with all sorts of headaches… darn it!

I’m talking about administrative tasks, taxes, accounting, separating your business income and assets from your personal, and the other boring stuff.

Not fun.  

But this is a sign you have a viable business going, which is great news. And there is more good news:

With the right business structure, you can avoid many of the pitfalls and make the “business” side of your online business easier to deal with so you can concentrate on what you do best instead.

And no matter what stage your business is in, even if it’s not making much or any money at all, whether you have employees or are flying solo, I’d recommend getting that set up sooner rather than later (like right now!).

And the business entity I’d recommend for most people is a Limited Liability Company, aka an LLC.

LLCs are the simplest to set up and administer but still provide a whole host of benefits and protections to your business.

The Benefits of an LLC for Your Online Business

Before we go into the details of how to set up your LLC, let’s first talk about why you would make such a move.

1. Tax Benefits of an LLC

With this type of business entity all the money you make is “passed through” the business to the members of the LLC – that’s you (and your business partners if you have any). Profits are divvied up among all the partners, in other words.

This means you – and your partners – can be taxed on their share of the business profits through their personal taxes. The company itself must also file a tax return – but the business doesn’t pay any taxes – unlike a corporation that is “double taxed.”

Consult your tax professional for the best filing options for your LLC.

2. Limited Liability

As the name says, LLCs limit your personal liability in relation to the business.

That means if, by some chance, something goes wrong and you owe money to creditors or vendors and your business must declare bankruptcy… nobody can come after your personal assets (your home, bank accounts, etc.) to pay the bills.

Same thing if your business is sued.

3. It’s Cheap and Easy

Of all the types of business entities and structures out there, there is less paperwork and admin tasks associated with LLCs. And although fees vary from state to state, it’s generally much less expensive to set up and maintain an LLC.

Also, compared to other corporate structures, LLCs give you a lot more freedom and flexibility in how you want to manage your company.

4. It Makes You “Legit”

Having an official corporate entity backing your business adds credibility to your business, which is especially handy when working with vendors or speaking with potential joint venture partners and that sort of thing. 

It also allows you to obtain business credit and funding – which can come in handy.

5. You Get Dibs on Your Business Name

By registering as an LLC with your state, you can secure the rights to the name of your company and nobody else in the state can use it. Keep in mind though, that the name of your company and the right to use it in your state can be a separate issue from a brand name and the right to use a name under trademark law.

How to Set Up Your LLC for Your Online Business

As I said, creating your LLC is a relatively easy process. Here’s what you need to do in general terms. Keep in mind that every state’s rules regarding LLCs can be a bit different.

1. Figure out a name for your business and register it.

If you already have a brand or business name that you use on social media or website, this step should be easy. Simply use it when registering your LLC.

Of course, you don’t have to use your brand or business name for the LLC. You can make up something totally new and different if you’d like. In fact, you might have to do this if you discover that somebody already has registered your brand as an LLC.

You can do a name search online through the appropriate state agency, usually the Secretary of State.

One last thing: you should include LLC or Limited Company at the end of the name.

2. Pick your registered agent.

All states require an LLC to have what is called a registered agent. This person receives official and legal documents on behalf of the company.

There are companies that provide this service. But you can also name yourself, an employee, or really whoever else you want as your registered agent.

That is, as long as they are 18 years old and are available at an address in your state during business hours.

3. Prepare your LLC’s articles of organization.

This is where you formally file documents to register your business as an LLC. In most states these are known as articles of organization.

On these documents you must provide the business name, address of the place of business (this could be your home address), the purpose of the business, how the LLC will be managed, contact information for your registered agent, and how long the LLC is supposed to last (if you have planned end date).

All the business owners must sign the forms as well.

4. File your LLC’s articles of organization.

At this point, you will submit the documents you’ve filled out and pay the filing fee.

Usually, you can do this online. Once the application is approved, you’ll be issued a certificate for your LLC.

You’ll need this form for setting up a business bank account and securing your tax ID number.

5. Pay your annual filing fee.

To keep your LLC active, you are required to submit an annual report to the state and pay an annual fee. Usually, you can do this online in a matter of minutes.

That’s it. You now have an LLC up and running.

It’s a process that is relatively quick and easy… and low cost. The total varies from state to state but the fees, all in, run from $50 to $500.

Whether you run a business with employees or are a solopreneur, you’re ready to enjoy the benefits and protections of this unique business entity.

Frequently Asked Questions About LLCs for Online Business

Do I need an LLC to sell on my own website?

No, you are not legally required to have an LLC to sell on your own website.

By default your business will be treated as a sole proprietorship (or partnership if you have one or more partners).

But as a sole proprietorship, you can be personally liable for any claims or lawsuits against your business. This means that someone can go after your personal assets like your house, savings, and car.

Setting up an entity, like an LLC, can help limit your liability and protect your personal assets from any lawsuits or claims against your business.