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

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 😉

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23 thoughts on “When And Why Should I Turn My Blog Into An LLC?”

  1. I have to agree, I have heard horror stories such as the one mentioned above about people not only loosing their businesses but they loose their personal savings and retirements. I work with a small web firm and we are LLC and it is worth getting. I am about to start a new buisness and I will go out and get an LLC before I take on my first client.
    .-= element321´s last blog ..Free Market Research with Google Analytics =-.

    1. Thats exactly the problem with a sole proprietorship, I have seen many people who turn millionaires in their mid thirties and due to a small mistake they are forced to announce bankruptcy, the Indian law isn’t very strict on small business owners, but in some countries like the US and Canada you can loose everything with one lawsuit.

  2. Yeah, for as easy as it is now to form an LLC (especially with online services which help) it’s definitely worth considering once you begin to pull in serious money. You don’t want to be caught with your pants down when the IRS comes knocking on your door from unpaid taxes.
    .-= Murlu´s last blog ..5 Best Benefits Of Working Online =-.

  3. I have just recently entered the blogging world and this is the first time I have read this type of story. Very interesting. I will definitely keep this in mind if I am able to reach a high amount in earnings.

  4. Really great post man!
    Really impressive that a 14 year old blogger is already talking about taxes and all that. Haha. But definitely some great advice here, I was never really sure what the benefits of having a limited liability corporation was until just now.

    CJ

  6. Hey Vishal, thanks for sharing these useful and definitely legit information. I was thinking about this a month ago (about taxes actually), and good thing you have mentioned this LLC option. But I think laws regarding this industry really depends on the country, perhaps the best thing to do is to consult to local lawyers, as you have mentioned. As long as there are other legal options then I suppose it’s still good.
    .-= Jason @ How to be Successful in Life´s last blog ..5 Best Self-help Materials on How to be Successful updated Thu Jun 3 2010 7:49 am CDT =-.

  9. I think it’s essential to protect yourself as you become more successful, as you’re increasingly under scrutiny. However, depending on your blogging niche it could “sour” the relationships you build with your readership. It’s often better to be transparent, so if you are considering going down the LLC route keep your subscribers informed of any changes that might impact them – in many cases they will have “bought into” you, not a business.
    .-= Michelle @ Stationary Bike Trainer´s last blog ..Stationary Bike Trainer =-.

    1. Thanks a lot for commenting Aswani!! Glad to see that you liked it, I’m sure your blog will grow and someday you’ll surely be in need for this.

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