When And Why Should I Turn My Blog Into An LLC?

by Vishal Sanjay · 23 comments

This is a guest post by Vishal Sanjay of DumbLittleBlogger.

When your blogs income increases to a significant rate, you can definitely reduce expenses and increase income by turning it into an LLC. I guess most of you have already heard about what an LLC is, it stands for ‘Limited Liability Company’.

An LLC is a business entity which is commonly used by small business with a medium workforce and revenue. An LLC requires a small amount of investment for applying and advisory, but its stands over a large advantage against sole proprietorship on issues such as taxes and asset protection.

An LLC has got many features in it such as owner flexibility, tax benefits, business debts and asset protection and at the same time it’s got many disadvantages as well, so at the end of this post I have given a detailed explanation on how to use these features for maximizing your benefits.

llc for websites

I have covered almost all the advantages and tips for converting your blog into an LLC, but I’m well aware of how the Indian law stands, but across the world most of these remains the same, but for a few minor changes.

When Should You Opt For An LLC?

The idea is not very clear, I would mainly recommend that you consider a change only when you feel it’s much more profitable than being in a sole proprietorship which is the entity for those who are freelancing or own businesses with small revenues and employees and most of the bloggers and freelancers online come under this entity.

Almost 75% of the bloggers these days don’t pay taxes on their earnings, usually because it is under the standard yearly earnings limit of their countries, so until you reach such a level its advisable to have a sole proprietorship, but if you get really popular or have enough cash in your banks without the earnings I’d say its best to opt to an LLC, as once your blog gets popular you have great chances of getting into controversies and may face many law actions, so its recommended to opt to an LLC.

If you are deciding according to your earnings, it’s recommended that you generate up to $10000 in monthly income and your business should have the potential to generate passive income. Remember you’ll be taxed on your salary bills, so make sure your salary bills are low.

Why Should You Opt For An LLC?

1. Tax Benefits

One major advantage of converting into an LLC is the tax benefits, if you are paying $10,000 tax each year for your sole proprietorship, then you’ll pay less than $5000 for an LLC, this is very beneficial for those bloggers who have no employees because one drawback of this is the taxes laid on salaries which ranges from 7% to 30%.

Savings on an LLC is very huge; there are many ways to optimize your legal entity for benefits. For example just imagine a scenario, you hired a staff blogger for your blog and now he has to be paid, other than his payment you also will incur taxes for that, to avoid this you can negotiate a deal according to which he is paid 50% less and in turn is given a share in revenues for the posts he writes.

2. Asset Protection

One of the best uses of an LLC and something which people love about it is its asset protection, which is really essential for blogs once they become a bit popular.

In any business you have a chance of loosing your personal assets due to wrong doings in your business, an LLC cannot allow you to fully protect your money but it can help you in protecting other assets and personal savings. With this feature you can optimize your company and assets to be fully protected, as you are liable only to the amount you hold in your company.

Imagine a scenario, you own a popular blog network named Gregson media which is worth hundreds of thousands of dollars, you own a logo which is worth one million dollar, a office building worth $300,000 and a demat account which is again worth a million dollars.

You create separate entities under LLCs for all which is, Gregson media networks LLC – for your blogs, Gregson Logo LLC (have to pay royalties), Gregson real estate holdings LLC – for your office building and Gregson securities LLC – for the demat account. You may be thinking that creating so many entities would make this tough to manage and simply a waste of money, but in the difficult times this is the safest.

Now just imagine Gregson media writes something negative about a company on one of its blogs and fails to prove it and due to this they are now sued by that company for millions, if Gregson had been running his business as a sole proprietorship he would stand to loose everything – his blogs, his office space as well as his investments, but in this he is liable for only his blogging group and he may not loose even that as his trademark is part of a separate entity.

3. Owner Flexibility

This is one of the best reasons to choose an LLC, its owner benefits, which are accessible in almost every country in the world. The members of your LLC can be anyone, individuals, trusts, foreign citizens, aliens and corporations. This is the reason why most small and medium sized companies choose an LLC; by freeing ownership they have the option to raise funds easily.

You can use these ownerships for maximizing your asset protection and tax benefits, explaining that is pretty complicated, but I’m sure you’ll save a lot leaving aside short term expenses.

4. Business Debt

If you are running under a sole proprietorship you will get debt for your business, but in turn you’ll be asked to give a personal guarantee, so in case your business fails to pay back the debt you’ll be held liable as with your business. As with an LLC you’ll get business loans without any personal guarantee.

This will definitely reduce the risk on your head and more if you can get a good credit rating you can definitely establish a huge line of credit. Most nations also provide tax benefits on dividends for taking debt, but some ask you to give a personal guarantee for the benefits.

On To Our Readers

Well I think most of you are wondering why I forgot to tell about how to turn your blog into an LLC, that’s actually because you must consult a lawyer or corporate attorney for this job, it won’t be effective if I tell you this because this is just some book read knowledge besides I’m just a Dumb Little Blogger 😉

About Vishal Sanjay

Hi, I'm Vishal Sanjay, a 14 year blogger and inetrnet marketer looking to make a fortune online. I am also an SEO expert and I have given service to many websites. I run 3 blogs and write on hubpages and squidoo. Check My Blog for more such tips. You can also Follow me on Twitter @dumbblogger

has written 4 superb article(s) on this blog

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Colleen June 4, 2010 at 10:06 pm

Although there are tax benefits, there are tax pitfalls as well. We have a LLC and rarely use it. The fees incurred to maintain it, outweigh the tax benefits.
.-= Colleen@Kennewick Real Estate´s last blog ..Utter Disappointment And The Classiest Acts That Followed, Armando Galarraga, Detroit Tigers, Jim Joyce =-.

Vishal Sanjay June 5, 2010 at 9:48 am

Yes Colleen maintaining an LLC is expensive, that is why I recommended a monthly income of $10,000 and moreover it depends on the country, so you cam maximize your benefits by consulting a corporate lawyer.
.-= Vishal Sanjay´s last blog ..My annual report : One year after starting to blog =-.

Mark June 5, 2010 at 8:09 pm

Good information. My thoughts are that with an LLC you are protecting your personal finances, retirement in such. I think everyone should educate themselves on this. Thank you for sharing your knowledge.
.-= Mark´s last blog ..Portable Onion Tank =-.

Menandro June 12, 2010 at 4:53 pm

Thanks for this advice. I sure want to have a good business online and make everything proper, including paying taxes as well as benefiting from it.

Some time back, I was worried about it. My dad asked if there are any taxes applied to online businesses and I could not answer. Being a lawyer, he strongly advised me to look into it before I get future problems.

Philip February 25, 2011 at 8:27 pm

I am just beginning to board this internet money making train. Although my revenues has not gotten to the state where I should consider turning it into an LLC… I am glad that this article pointed this out to me. Something to think about and prepare for when I get there. Thanks.

Michelle Sterling September 7, 2011 at 7:03 am

Bloggers really should convert into an LLC when they start doing really good, it is almost a standard procedure if it isn’t then it should be. Taxes shouldn’t be ignored since it is kind of our responsibilities as citizens to contribute to the improvement of our country.

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