By Shannon Stahlin, CEO, Direct Incorporation
One of our Facebook friends posted a great question on the Direct Incorporation page this week asking whether she should incorporate her business.
Here’s her question:
“ So – I write a blog but have not done anything about actually registering a business name or incorporating. I make a little money through advertising, not a lot. Should I make things formal? Wondering about pros and cons, especially cost-benefit tradeoff.”
– Erika Kerekes, who writes the food blog In Erika’s Kitchen
Here’s my answer:
“That’s definitely a great question and I’m happy offer some help. (Read our disclaimer and keep in mind that we are not a law firm and cannot offer legal advice.) There are definitely benefits to incorporating a business that is generating any amount of revenue.
One needs to balance the benefits with the cost. Not just the cost of incorporating but the cost to keep the LLC/Corp going – particularly, more administrative work and annual fees. The annual fees vary by state. For example, the annual fee is just $15 in Michigan, but $800 in CAL. Which state are you in Erika? As for the administrative work, we have a program to simplify and assist you with “corporate formalities” and deadlines: businesscomplianceprogram.com. We make it pretty easy for our clients to knock down these requirements.
On the other hand, there are numerous benefits to incorporating or forming an LLC, but there’s a few that stand out. To start, there can be tax benefits, sometimes significant, depending on your choice of entity. You will also legitimize your operation with an official corporate name – In Erika’s Kitchen, LLC. The name also gets locked in with the state, so no other entity can apply for that particular name, which can also kick-start potential trademark rights in the name.
Another key benefit is the liability protection that an entity offers. The general rule is that if the business is ever sued, you can collect against the business, not the owners of the business. Peace of mind for any business, don’t you think?”
We love hearing from clients on our Facebook page. If you have questions, please don’t hesitate to post them on Facebook or right here on our blog. I’ll do my best to answer them. Thanks. – Shannon