Should You Form an LLC for your Notary Business? Why I Say Yes!

Advantages of forming an LLC

If you’re running your own business, you have likely heard it before: To LLC or not LLC? That seems to always be the question!

When you’re working on your own as a paralegal or notary, it’s easy to default to becoming a sole proprietor. The paperwork is rather simple, taxes are easy enough, and there’s no headache with annual filings and fees.

That being said, LLCs have a great deal of advantages that should absolutely be considered when building your business.

What is an LLC

Before we dive into the specifics of what those advantages are, let’s consider what an LLC actually is. An LLC is short for a limited liability corporation. Basically, it separates you personally from your business when it comes to legal and financial issues.

If your business goes bankrupt and you’re a sole proprietor, your personal home and savings are at stake, but with an LLC that is not the case. If your business has a legal issue as a sole proprietor, again, your home and personal savings are at stake. With an LLC your are protected. Simple enough, right?  

Advantages of forming an LLC
Close-up of business objects at workplace on background of office workers interacting

Why do People Avoid Forming an LLC?

The most common reasons we run across is that it costs more and the process can be confusing. And it’s true. A sole proprietorship only needs a DBA and that typically costs $50-$100. An LLC not only has initial registration and filing fees but also has an annual fee. On top of that, taxes can be completed in one of 3 ways, which further adds to the confusion.

That being said, moving forward as an LLC is absolutely the preferred method.  When has anything truly valuable and worth doing ever been “simple”? Below, we’ve put together our most compelling reasons for jumping on the LLC wagon without hesitation.

Advantages of Forming an LLC vs Sole Proprietorship

It Limits Your Liability

First and foremost, you limit your liability.  Imagine that… a Limited Liability Corporation limits your liability. As mentioned earlier, when you create an LLC you establish a clear separation between you and your business. Your personal assets stay personal, and your business assets stay with the business. This means that in the case of financial or legal issues, your personal property (homes, cars, savings, etc) cannot be touched.

This extra layer of protection can be especially important for individuals in the notary and paralegal professions. In today’s world, lawsuits are a dime a dozen and this extra step can protect you from litigious individuals.

Grow your Notary Business

Having an LLC also gives your business room to grow. There are many different services  you could offer alongside your notary or paralegal services, and having one business name to encompass them all (with the help of DBAs) is easier than setting up separate entities for individual services you offer.

Furthermore, having an LLC allows you to raise capital, add more than one partner, and transfer ownership if necessary. If you’ve been operating as a sole proprietor, we encourage you to take a step back and think about the bigger picture. Establishing an LLC can really open up opportunities for you and your business long term!

Tax Advantages of LLC

“But how do I do taxes?” is another big concern we hear when chatting with notaries and paralegals about establishing an LLC. Yes, they are slightly different, but the good news is you have a ton of flexibility.

If you are a sole proprietor, you have to file taxes as a sole proprietorship. If you are operating as a corporation, you must pay taxes as a corporation. But, if you operate as an LLC you can actually file taxes as a sole proprietorship, a partnership, or as a corporation.

Your tax advisor will have more details on this, but basically, as with a sole proprietorship, income tax is still paid through the individual owners and not the LLC / business itself. Only the net income of the business is taxed, and in many instances tax rates are lower than with a corporation (so filing taxes through sole proprietorship or partnership tends to be the preferred method when applicable).

Credibility of an LLC

For anyone serious about growing their notary business, this reason alone is a great selling point. When you have a solid business name and great looking business cards, you feel confident in your work. Having an LLC gives you an extra boost in your clients’ eyes. You no longer look like a “freelancer” with a side job as a notary or paralegal. Instead, you look like a professional and established business owner.

Benefits of a Limited Liability Corporation

Overall, an LLC will protect you and provide more options as your business grows. Although the process for establishing one can be a bit more complicated, it’s not impossible. Several of our partners have been able to do it themselves through their Secretary of State websites. You can also hire companies like Legal Zoom, IncFile, or Swyft Filings.

Still on the fence? Let us know in the comments below. Already established your LLC? Let us know why you made the decision and how it’s been going. Look forward to hearing from you!

Is your notary business registered with Notary Jane yet? Learn about becoming a member.

By Phillip Hogan, Owner/President of Signing Services of America, LLC

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