So, you’re starting a blog—not as easy as it sounds, but you already know the amount of work you need to put into it. It’s great that you’re taking the right step to turn your passion into a small business. But the question is, which between LLC and sole proprietorship is better for your blog?
LLC is better for a blogger because it provides liability protection that you won’t get from a sole proprietorship. It’s not necessary if you’re only starting and don’t make a living from your blog. However, as your business grows, you have to form an LLC to protect yourself from company liabilities.
Of course, forming an LLC isn’t ideal for many bloggers. So let’s discuss everything you need to know about an LLC and a sole proprietorship. Stick around to find out why and when you should form a business entity and which of these two is better for your blog.
What Is a Sole Proprietorship?
A sole proprietorship is a business entity that has a sole owner. The owner will be responsible for managing the business, including the profits, losses, and debts that the company may incur. Most bloggers start as a sole proprietorship. A blog is considered a business as soon as the owner starts making money from the content.
If you started your blog as a hobby, just publishing your passion on the web, you’re not required to form a business entity. However, if it starts to generate income, you’re already running a sole proprietorship. That’s why many bloggers are not aware that they’ve already formed a business entity.
Advantages of Sole Proprietorship
One of the most significant advantages of a sole proprietorship is simplicity. If you have a blog that makes money, you already have a business. You don’t have to submit paperwork to legitimize your business. Although some states may require a business license, it’s still a more straightforward process than forming an LLC.
Tax preparations for a sole proprietorship are also more straightforward because a blogger only needs to file as an individual. Aside from Form 1040, you only need to use a Schedule C form to file your taxes. It means that you’ll be accountable for withholding and paying your taxes on behalf of yourself and the business.
Disadvantages of Sole Proprietorship
A sole proprietorship is a much simpler process. In fact, many bloggers are already running one without even knowing it. That’s because it’s effortless to form and doesn’t require anything other than to pay taxes. However, many bloggers aren’t satisfied with keeping their business as a sole proprietorship because it doesn’t provide them with liability protection.
There’s no separation between the owner and the business. If the business gets sued, for any reason, the one who gets sued is the owner. There’s also no separation when it comes to the assets and liabilities of the business and the owner, making it more challenging in terms of scalability. That’s why growing blogs don’t usually settle in being a sole proprietorship.
What Is an LLC (Limited Liability Corporation)?
LLC or Limited Liability Corporation is a business entity that creates a separation between the owner and the business. An LLC can have one or more owners, but all of them are considered as separate entities. By forming an LLC, you create a separation between your personal assets and liabilities and the business’s assets and liabilities.
Forming an LLC is a bit more expensive than a sole proprietorship because of the paperwork needed. Besides registering a unique business name, you’ll also need to file the “articles of organization.”
Most states will require you to file it with the Secretary of State. In some, you’re required to file it with the State Corporation Commission, Department of Consumer and Regulatory Affairs, or the Department of Commerce and Consumer Affairs.
Advantages of an LLC
One of the main reasons why bloggers should form an LLC is to provide them with liability protection. Businesses that deal with content publishing may have to deal with several issues, but an LLC protects the owners from most of these.
If you’re running a sole proprietorship and the business gets sued, you (as the owner) will face charges. On the other hand, an LLC separates the owner from the company. So when the business gets sued, it’s the company that’ll face the charges, not the owner.
Aside from legal liabilities, it also protects the owner from financial trouble. In an LLC, the owner’s assets are separate from the business’ assets. So when the business runs into financial difficulties, it’ll be the business, not the owner.
Tax preparations may be a bit more complicated than if you’re only running a sole proprietorship, but it helps lower your taxes. An LLC with a sole owner will file taxes similar to how sole proprietorship files taxes. If there’s more than one owner, you’ll need to file a Form 1065 to establish a partnership. Doing so protects you from double taxation, which is common when you’re running a sole proprietorship.
Disadvantages of an LLC
There are only a handful of disadvantages that you’ll encounter with an LLC, and the most significant concern is related to taxes as well. Since the owner and the business are two separate entities, tax preparation will be more complicated than if you’re only filing your taxes as an individual. The IRS also has various requirements and forms that you need to submit as an LLC.
Should You Form an LLC for Your Blog?
LLC is better for any blog than a sole proprietorship, but should you really get one? The answer is it depends on the scale of your blog. If your blog is solely for your hobby, you don’t really need to form a business entity because you don’t intend to make money from it. However, if you’re consistently publishing content, you may have to consider monetizing it one day.
As soon as you make money from your blog, you’re already running a sole proprietorship. The amount doesn’t matter; as long as it produces an income, it’s already a business. Due to the cost and complexity of forming an LLC, small bloggers may not even consider it an option for their business. However, as your blog continues to grow, you may want to consider forming an LLC to protect yourself.
Regardless of the content that you’re publishing on your blog, forming an LLC is a crucial step. It’s so important that some experts advise people to have an LLC even if the blog isn’t making money yet. As long as you intend to turn your blog into a business someday, it will provide you liability protection.
Forming an LLC when you’re only starting your blog isn’t that crucial; a sole proprietorship can make things simpler for you. However, it’s still something that you may want to consider, especially if your original intention is to make money from it eventually.
Growing blogs and bloggers who want to turn their passion into a business must form an LLC. Although it’s a bit more expensive and complicated than a sole proprietorship, you should still have one because of the perks you can get from running an LLC versus a sole proprietorship.
Conclusion
Starting a blog is easy, but turning it into a full-blown business requires a lot of time and hard work. That’s why it’s crucial to take the right step in building your business.
A sole proprietorship is more than enough for a small blog that only started to make money. It’s what most bloggers have, especially those who only started it as a hobby. However, if you have a solid business plan for your blog and are serious about making money from it, an LLC is a much better choice.