Yes, nothing can provide 100% protection all of the time, so LLC+Insurance is a good way to go.

While I can understand why some lawyers might feel that an LLC might not provide much protection for you. There is certainly less exposure for a blog about internet marketing that is mostly monetized with e-books, software and hosting services than with some other niches. However, the exposure that you might have may not be covered by most insurance policies either — so it’s good to look at those carefully.

However, how much an LLC can benefit an internet marketer really can depend on the web properties that a marketer/blogger owns. A blogger who sells their own “hard” products has more liability exposure than one who writes about fitness and occasionally links to fitness products — but both could get sued by someone injured by one of those products.

While you can’t avoid getting sued, if you could successfully have a court limit the suit to the LLC, that could also possibly prevent a lien going on your personal property during the time the litigation is pending (usually years) that could prevent you from selling your property or borrowing against it. And, for those who still have day jobs, being able to limit suits to the LLC can keep all of those distracting court filings from popping up when a prospective employer Googles your name. These aspects are usually overlooked by CPAs when they recommend against an LLC.

Kind of like insurance or a gun or a fire extinguisher — a person really doesn’t need corporate/LLC protection until they NEED it (and then you REALLY need it). And you may end up being surprised at how and why you get sued. In modern business times, anyone who really does any substantial business can plan on getting sued at least once.

So people have to talk with both attorneys and CPAs and then do their own risk-reward analysis. In many states, LLCs are cheap to form and require only a 1-2 page form to get started — an require much less paperwork than an S-corp or C-corp. In others, there can be a minimum yearly fee (some around $500, check with your State). Still, if a person is making any kind of real money online, that is a small price to pay for the extra protections and peace of mind.

Best,
Rob

Note that if you have them be the official document handler for your business (to avoid revealing your home address) that this will result in an extra fee. I did not think they did a good job of expaining that option (or the fee). So watch for that.

Otherwise, two thumbs up.

How was the process with Zoom?

You are correct! Having an LLC at the end of your business name does make your business look a lot more impressive.

I run a single proprietor business right now. Am not sure if LLC’s apply here in the Philippines. But your post on LLC is very informative, at the least.

Jaime

I’m at work, stucky behind a proxy server, so I wasn’t allowed to submit my comment to your discussion on forming an LLC.

Here was my comment:
- – -
I used to study real estate investing. I attended several presentations (some by lawyers, some not) on why to form an LLC. The more I found out, the more I learned you really need a good lawyer as soon as you can afford it.

Here’s two (of many) reasons:

How to protect your business from something you do outside of your business. Lets say you back into an nice old lady in a parking lot and she sues you for everything you have and wins. If you are the only “member” of your LLC, she can eventually “foreclose” on your membership interest and take over the company and everything it owns. The advice I got was to have a 2nd member in the company, even they only have a 1% interest. Why? Because if you own the whole company, you don’t need anyone else’s agreement to sell the company. If another person has to approve it, then sale is prevented. (Again, talk to an attorney, or hang out in real estate investor forums so you can be thoroughly confused).

As far as tax savings are concerned, unless you make a lot of money, there are no tax savings. The subchapter S tax method, for instance, saves you some taxes if you make more than what you (and the IRS) decide is a fair salary. (For example, you pay yourself as CEO of your company, $60,000 a year, but the company made $100,000. Subchapter S can help tax that extra $40,000 differently to save on self employment taxes.)

A few things — you are right, I do mean well.

Second, if I understand your point correctly, you are basically making the argument that since the LLC will provide some protection of personal assets in some situations, that there is no reason not to have one.

I agree.

My point here is that many people believe that if they form an LLC, that their assets are “protected” — and this is simply not the case. I think we agree on that.

The approach you recommend — LLC + Insurance — is exactly what I am doing, for exactly the reasons you state.

For the record, I have had a couple of lawyers that set up LLCs on a regular basis tell me that in my particular case (solo entrepreneur worried about blog-related damages) that LLC protection would be almost useless.

Thanks,
Mark

As Michelle said, setting up company status in both countries is fairly expensive and time-consuming, so if there aren’t any real benefits to being an LLC then I might have to re-think the whole thing. Thanks for the info, Mark and Josh!
Terry

Very interesting info and I’m looking forward to reading more about this topic in your blog.

I’m not an attorney nor am I am a CPA, but I do pay a tax attorney to do my taxes. Per my tax attorney, I need to make $10,000 per year or more from by business to realize any true tax savings by forming a LLC. Again, ask YOUR tax person for advice on your specific situation, but this is what I was told last year at tax time.

Also, a sole proprietor can apply for an EIN online. It’s very simple and only takes a few minutes.

Thanks again for the great info and a great blog.

-dc

The laws “as I know them” are very similar in Australia. There are hefty fees involved in setting up a company here and the ongoing paperwork and level of information to be submitted regularly is significant.

Looking forward to what you find out regarding insurance.

I love the logo.

Steve

Steve

I look forward to your follow up on the tax issue. Thanks for the info.

http://www.peakpersonalfinance.com/llc-corporation-better-than-insurance/

Regards,
Rob