If you are a regular Sarah Fit reader, then you already know that I recently made it official by forming Sarah Fit, LLC. While it’s perfectly fine to operate your business as a sole proprietor, I chose to make it official. This is an exciting time for me and I would not be here if it were not for all of you my readers. However as I sit here to write this post today, I’m wondering to myself, “Why exactly did I form a company?”
I’m sharing my story since I know many of you also have your own blogs and may have thought about forming a company, so I hope this post helps you decide what your next (if any) step should be.
I wanted to form a company because I thought it would help reduce the amount of taxes I was paying. I also thought it would help my business appear more official on paper. Most importantly, I knew that forming a company would provide myself protection. But later my CPA (tax adviser) asked, “What are you protecting?” I’ll talk about that shortly.
I decided to form my company through BizFilings.com. I was finally contacted by a personal incorporation specialist about 2 weeks after first reaching out given it was the end of summer, employees on vacation and a busy schedule on my end. When April, the specialist called, she first asked me first what type of company I wanted to form. To be honest, I thought we were going to talk about which ones were best. She directed me to BizFilings.com for more information on the difference between entities. My options were between Liability Company (LLC) or and Incorporation. I decided to call April back so that I could do some research on my own. If I were to have gone to a lawyer, they would have walked me through my options. It would have been more expensive but if you are DIY-type person, a lawyer may not be necessary. Next she asked what I wanted my name to be. I chose Sarah Fit, LLC.
I called April back and she asked me where I wanted to incorporate my company. Since I went to the University of Delaware, I’m aware many people incorporate there since it is inexpensive. I argued that since most of my business is operated throughout the US, I didn’t think it was mandatory I file in Massachusetts. April said that most people do file in their own state, because even if I incorporate in Delaware, I will still have to file taxes in MA and pay their $500 filing fee. Yes, Massachusetts has one of the highest fees! I immediately was overwhelmed, and again, had to call April back. If you live in Nevada or Delaware, you are lucky! You have small business friendly states.
This is when I wish I had actually spoken to a lawyer or CPA. April again, directed me back to the website of BizFilings.com for more details but didn’t offer much advice except for the fact that most people she had worked with usually filed in the state where they lived.
I called April back after researching online for a few days and chose to form my company in Massachusetts. The rest was pretty easy. April was quick to get back to me but I wish I had done more research before my talks with her began. Everything was done swiftly, took little time on my end, besides the research, and Sarah Fit, LLC was born!
About a week later, I met with a CPA to get my taxes organized as a freelancer. She told me that she has clients who make millions and never incorporate. She was surprised that I had done so. I told her that basically, I formed my own company to cover my butt and hope to increase revenue. People who form companies have protection over their personal assets, they are not personally liable. If you were to breach a contract, you could be sued for your assets. If you had a company, the company would be sued but your personal assets would go untouched. Since I am not a home owner nor do I own any expensive cars or large investments currently, I don’t really have any assets and therefore having protection over something I do have is not exactly necessary.
So I have a company. I have a government issued tax id to use as well, instead of just my social security number. I have not formally started my company yet but have the paperwork to prove it. In March, I’ll have to pay MA $500 to file my earnings report even though I will not have started it yet. That sucks to think about.
To conclude this post, as a blogger you can operate as a sole proprietor forever. Just get a good accountant to help with taxes.
Why incorporate? If you have a business partner, you want to hire employees, you own a home and other pricey assets, maybe you have kids to provide for… there are many good reasons! I enjoyed my experience with BizFilings.com and if you know what you want, they are a great company to use. If you are not sure what you want or need, you may want to seek the advice of a lawyer and accountant. I am giving professional advice but wanted to share my experience so you do not have to waste your money creating a company that you do not necessarily need to form.
Question For My Readers: Did you formally incorporate your business as a blogger? Are you happy you did and did you file in the state you live in?
Service provided by BizFilings.com were complimentary in return for an honest review, which I think I gave above.