Driving Excellence: How LLC Formation Empowers Digital Marketers to Cut Personal Costs and Thrive

There’s an old saying: You have to spend money to make money. That’s true no matter what business you’re in, and digital marketing is no exception. To run a successful digital marketing business, it’s imperative that you have sufficient startup capital and that you maintain a healthy operational budget.

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With that said, there are plenty of smart, strategic ways for digital marketers to streamline their costs. One option is to choose the right legal structure for your company. For instance, registering your digital marketing business as a Limited Liability Company, or LLC, can help you realize cost savings in more ways than one.

But what is an LLC? How can this structure help digital marketers cut costs? And what’s the best way to register your business as an LLC? Let’s look at each of these topics in turn.

1) Understanding LLCs

The LLC format is nothing new. In fact, it’s been around since the 1970s. Though it was originally meant for real estate investments, it’s become an incredibly popular option for businesses across every industry and vertical. Digital marketing is very much included!

To understand what makes an LLC special, it’s first necessary to have some context. Any time you start generating income on the basis of self-employment, the government automatically classifies you as a Sole Proprietor. When you run your business as a Sole Proprietorship, there is effectively no legal distinction between you and the company. All personal and business assets go into the same pot, and likewise with liabilities.

Sole Proprietorships are not inherently bad, but they are inherently limited. It’s tough to bring on employees or grow your digital marketing company if you’re operating as a Sole Proprietor. Additionally, you’ll be much more vulnerable to lawsuits, without any safeguards to protect your personal wealth.

That’s why most business owners eventually shift out of their Sole Proprietor status, whether by incorporating or by registering as an LLC. The LLC format is often seen as the best of both worlds, offering some of the legal protections of incorporation along with some of the flexibility of a Sole Proprietorship.

When you register your digital marketing company as an LLC, you actually do create a new legal entity, allowing you to distinguish between personal and business assets. This provides a number of advantages for growing your business and for keeping costs under control, as we’ll see in the next section.

2) Why the LLC Makes Sense for Digital Marketing Companies

Consider just some of the ways in which the LLC format can help your digital marketing company reduce costs and facilitate long-term growth.

Personal Wealth Protection

One of the most significant benefits of the LLC is personal wealth protection. Basically, you can keep your personal and familial assets separate from your business ones, meaning they are inaccessible to lawsuits or creditors. So, if your digital marketing company is sued, you don’t have to worry about losing your house, your retirement account, or your family nest egg. In an environment as litigious as digital marketing, this is an important benefit.

It also means you can feel confident investing in your business, knowing that you have the right protections to prevent catastrophic personal loss if the business hits a bump in the road.

Tax Flexibility

Another benefit of registering your company as an LLC is build-in tax flexibility. Basically, you can choose how you wish to report to the IRS: On a pass-through basis or a corporate basis.

For most digital marketing companies, being taxed on a pass-through basis makes the most sense. Basically, you’ll declare profits on your personal tax return, and pay at your normal rate. But if you decide it would make more financial sense to be taxed on a corporate basis, you have that option available to you as well.

Administrative Ease

LLCs are also beneficial because they come with very light administrative overhead.

Starting an LLC is simple and low-cost. We’ll cover the steps for LLC formation in the next section, but for now, suffice to say the regulatory requirements are slight, and the total cost may be just a couple hundred dollars.

There is also less required in terms of ongoing reporting and administrative work, allowing your digital marketing company to focus on creative work, strategic growth, and client satisfaction.

Credibility

Finally, registering as an LLC confers a high level of credibility on your business.

Not just anyone can register an LLC. There are a few legal hoops to jump through first. As such, successfully registering as an LLC conveys a sense of professionalism, making it clear that yours is a “real” business.

This credibility can be impactful as you seek to earn the trust of potential investors or lenders, offering your business additional financial advantages.

3) How to Register Your Business as an LLC

For digital marketing companies desiring these financial advantages, there are a few steps required for LLC formation.

These steps can vary from one state to the next. A step by step lesson to form an LLC in Wyoming will be different from the process in California, or in Delaware. With that said, here’s a general overview of the LLC registration process.

Choose a Name

Your LLC will need an official, legal name. The most important thing here is picking a name that isn’t already in use by an LLC in your state. Generally, searchable directories are available to help you confirm the availability of your desired name.

Select a Registered Agent

It’s a legal requirement for every LLC to name a Registered Agent. This can be a person or an institution, tasked with gathering legal and tax documents on behalf of the business. Look into third-party services, which are very affordable and can help you free more time for creative or strategic work.

File Your Paperwork

Naturally, establishing a new legal entity requires filling out some documents. There are two in particular that are worth noting:

• Your Operating Agreement, which functions as a blueprint or charter for your organization.
• Articles of Organization, which officially establish your LLC as a distinct legal entity.

Note that you’ll also need to pay your state’s filing fee, which can be anywhere from $20 to $300.

Get an Employer Identification Number

Your EIN will be necessary before you can file taxes or process payroll. The IRS will assign you a number for free.

Establish Long-Term Success for Your Digital Marketing Agency

As you seek a business model that allows for digital marketing excellence, make sure you consider all your legal options. Generally, the best bet will be registering as an LLC, following the basic outline provided here.

Author Bio

Amanda E. Clark  is a contributing writer to LLC University. She has appeared as a subject matter expert on panels about content and social media marketing.

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