How to Start an LLC (And Legally Save Big on Taxes)

If you’re freelancing, side hustling, or building a small business, chances are you’ve heard these three powerful letters tossed around:

LLC.

But what exactly is an LLC? Do you really need one? And perhaps the most pressing question—can it actually save you money on taxes?

The short answer? Yes—and then some.

In this guide, we’re breaking it all down in plain English: what an LLC is, how to form one, and how it can be one of the smartest money moves you make as an entrepreneur.

What is an LLC?

LLC stands for Limited Liability Company.

It’s a business structure in the United States that blends the benefits of two worlds:

✅ The legal protection of a corporation
✅ The simplicity of a sole proprietorship

That means you can run your business without putting your personal assets (like your home or savings) at risk. And you don’t need to mess with the complex rules and red tape that come with full-blown corporations.

If you’re freelancing, consulting, running an e-commerce store, or even creating content—starting an LLC can make your business more legit and more protected.

Why Start an LLC?

Forming an LLC isn’t just a fancy legal checkbox. It has real, practical benefits that matter, especially when you’re leveling up your income or going full-time with your business.

✅ 1. Protect Your Personal Assets

Your LLC is a separate legal entity. If your business gets sued, your personal assets are off-limits—as long as you keep your business and personal finances separate.

So if someone files a lawsuit, they can go after your business bank account—but not your house, car, or personal savings.

✅ 2. Boost Your Credibility

“YourName Design, LLC” sounds a lot more professional than just “YourName.” It gives your brand weight—whether you’re pitching clients, applying for grants, or opening a business bank account.

✅ 3. Unlock Tax Flexibility

This is where it gets exciting: LLCs have multiple tax options.

By default, they’re “pass-through” entities, but you can also elect to be taxed as an S Corporation to save on self-employment taxes (we’ll break this down later).

How to Start an LLC in 6 Simple Steps

Think starting an LLC is complicated? Think again. You can usually complete the process in under a day—and it’s easier than filing your own taxes.

Here’s the simple, step-by-step breakdown:

1. Choose a Business Name

Your name must be unique in your state and include “LLC” or “Limited Liability Company.” Check your state’s website to see if your name is available.

Tips:

• Keep it professional and easy to remember
• Avoid trademarked or restricted terms
• Run a quick domain check if you want the website too!

2. Designate a Registered Agent

A registered agent is someone (or a service) who receives legal notices and tax forms for your business.

You can be your own agent if you have a physical address in the state where you’re forming the LLC. Otherwise, services like Northwest Registered Agent or ZenBusiness can do this for around $100/year.

3. File Articles of Organization

This is the official form you submit to your state to legally create your LLC. It includes basic info like your business name, address, and structure.

Costs range from $50–$300, depending on the state.

Tip: Many states let you do this online for instant processing.

4. Create an Operating Agreement (Optional but Smart)

This internal document outlines how your business will run, including:

• Ownership percentages
• How profits are split
• What happens if someone leaves or the business dissolves

Even if you’re a solo owner, this document can help in legal disputes and when opening business accounts.

5. Get an EIN (Employer Identification Number)

This is your business’s Social Security Number, used for:

• Filing taxes
• Opening a business bank account
• Hiring employees

Apply for free at IRS.gov. It takes 5 minutes.

6. Register for State Taxes and Licenses

Depending on your business type and location, you may need:

• Sales tax permits
• Local business licenses
• Professional licenses (e.g., for accountants, therapists, etc.)

Check with your state’s department of revenue or business division.

How an LLC Can Save You Money on Taxes

Here’s where things get juicy.

LLCs offer flexible tax options that can help you legally minimize your tax burden. Here’s how:

✅ 1. Pass-Through Taxation

By default, LLCs don’t pay corporate taxes. Instead, profits “pass through” to your personal tax return. You report business income on Schedule C (if solo) or Form 1065 (if you have partners).

This means:

• No double taxation like with C-Corps
• Simpler filing process
• Your business profits are taxed at your personal rate

✅ 2. Deduct Business Expenses

As an LLC owner, you can deduct all ordinary and necessary business expenses, including:

• Office rent or home office portion
• Equipment & software (Adobe, Canva, Zoom, etc.)
• Marketing and ads
• Internet & phone bills (business portion)
• Business meals and travel
• Continuing education and courses

These deductions can significantly reduce your taxable income—saving you thousands.

✅ 3. Elect S Corp Status to Save on Self-Employment Taxes

Here’s a next-level strategy:

Once your business earns $50,000–$100,000+ per year, you can elect to have your LLC taxed as an S Corporation.

Why this matters:

As a sole proprietor, all your profits are subject to 15.3% self-employment tax.

But with an S Corp:

• You pay yourself a reasonable salary (subject to SE tax)
• Remaining profit is a distribution (not subject to SE tax)

Example: $100K Business Profit

💥 That’s a serious chunk of change.

Heads up: S Corp election requires payroll setup and separate tax filings. Worth it when profits hit ~$70K+, but consult a CPA.

Tools to Simplify the Process

Starting and running an LLC doesn’t mean going it alone. Here are some tools to make the journey smoother:

LLC Formation & Legal

• ZenBusiness – Affordable LLC filing, EIN, registered agent, compliance
• LegalZoom – Great for add-ons like trademarking and custom legal docs

Taxes & Bookkeeping

• QuickBooks – Full-featured accounting
• Wave Accounting – Free, user-friendly accounting for small businesses
• Bench – Bookkeeping + tax filing all-in-one

Tax Planning

• Collect receipts and track mileage with apps like Expensify, MileIQ, or Keeper Tax
• Hire a CPA familiar with S Corp strategies

Final Thoughts: Is an LLC Right for You?

If you’re making consistent income from freelancing, coaching, consulting, or selling products—it’s probably time to go beyond hobby mode.

An LLC makes sense if you:

• Want to protect your personal assets
• Want a more professional image and business bank account
• Plan to earn $30K+ per year
• Want access to smart tax strategies like the S Corp election

Even if you’re just getting started, forming an LLC early helps you build a legit business foundation—so when you grow, you’re ready.

💬 Ready to Start Your LLC?

So—what’s holding you back?

Forming an LLC is one of the best investments you can make in your business. It gives you peace of mind, tax savings, and room to grow without risking everything you’ve built.

If you’ve already started an LLC—what was the biggest benefit for you?

Still have questions? Drop them in the comments below. Or reach out to a professional who can help structure your business for maximum growth and efficiency.

Your business deserves a strong foundation—and it starts with three letters:

L-L-C.