With the rise of the gig economy, many people are seeking alternative ways to supplement their income or pursue their passions. From freelance writing and graphic design to selling handmade goods on online marketplaces, the options for starting a side hustle or small business are virtually endless. Whether you're tech-savvy and want to start a software development business, creative and want to start a design studio, or entrepreneurial and want to start a retail store, the opportunities for starting a side hustle or small business are vast and varied.
However, as you grow your business, it's important to take steps to protect your personal assets from potential legal and financial risks. It’s important to consider setting up a legal structure as they can be an important step for anyone who wants to grow and protect their business. By understanding your options, you can make the right decision for setting up your business for continued success and growth.
There are many entities you can choose from to help protect your personal finances and maximize your investment. Among the most popular options are LLCs, corporations, and living trusts.
An LLC, or limited liability company, is a business structure that provides limited liability protection to its owners. This means that the owners are not personally liable for the debts or liabilities of the business. It also has flexible management rules and pass-through taxation, which allows the owners to pay taxes on their income at the individual level.
A corporation, or corp, is a business structure that offers limited liability protection to its shareholders. It also has more formal management rules than an LLC. It offers the advantage of double taxation, which means that the business pays taxes on its income at the corporate level and then the shareholders pay taxes on the income at the individual level.
A living trust is a legal entity that allows you to transfer the ownership of your assets to another person, such as a family member or friend. It can also be used to manage your assets during your lifetime or after your death. The assets in the trust are managed by a trustee, who is appointed by you.
Protection of Personal Assets
One of the biggest benefits of setting up an LLC, corporation, or living trust is the protection it provides for your personal assets. If your business is sued or faces financial difficulties, your personal assets, such as your home and savings, will generally be protected if you have set up a legal structure. This means that you won't have to worry about losing your personal assets in the event of a business crisis.
Separation of Personal and Business Finances
Another advantage of setting up a legal structure is that it helps to separate your personal and business finances. This can make it easier to manage your business finances, keep track of expenses and revenues, and avoid any confusion that may arise if your personal and business finances are mixed.
Setting up an LLC, corporation, or living trust can also provide tax benefits. For example, corporations are eligible for certain tax deductions and can take advantage of lower tax rates. Additionally, living trusts can help to minimize probate fees and reduce estate taxes.
Having a legal structure in place can also increase the credibility of your business. It shows potential customers and partners that you are serious about your business and are taking steps to protect yourself and your assets.
Peace of Mind
Finally, setting up an LLC, corporation, or living trust can provide peace of mind. By taking this important step, you can focus on growing your business and pursuing your passions without worrying about the legal and financial risks that may arise.
Ensure Protection Today
Setting up an LLC, corporation, or living trust is an important step for anyone who is starting a side hustle or owns a small business. By providing protection for your personal assets, separating your personal and business finances, providing tax benefits, increasing credibility, and providing peace of mind, a legal structure can help you grow your business and pursue your passions with confidence. So, if you're serious about growing your business and protecting your assets, consider setting up an LLC, corporation, or living trust today. If you need help creating one of these legal structures or just want to learn more, AmeriEstate’s experts can assist. Contact us for a free consultation.