Editor’s Note: “Should we become an LLC?” This was a question Delilah and I pondered for years before actually taking the leap and making it happen. Did we have to budget for it? Yes. Did it break the bank? No. Are we glad we did it? TOTALLY! Not only did we get to cross something off our to-do list that had been on there WAY too long but we took action to protect ourselves, each other and our business. That (as our friend/Craftcation: Business + Makers Conference presenter Kiffanie will explain below) is priceless.

Kiffanie is ready to make it SUPER easy for you as well. She’s offering a FREE one-day online workshop. Click here to grab your seat in her FREE workshop and for details. If you want to purchase the workshop so you can rewatch it anytime, Kiffanie has generously offered Dear Handmade Life readers $20 off for the All-Access Pass (use the code: DHL20).

-Nicole S.

What’s the one question you get asked most often?

For me that question is,

“Should my creative business be an LLC?”

Some creative business owners dismiss the idea that they are ready for an LLC off-hand.

They think:

• I’m making less than $50,000, my business isn’t big enough yet
• I operate completely online, I’ll get my LLC when I start teaching in-person
• I’m a one-woman show, I’ll get my LLC when I hire a production assistant

And others know that it’s a good idea, but get bogged down. They:

• worry about how the costs associated with creating an LLC will impact their bottom line
• look at the legal paperwork, get annoyed and let the task sit on their to-do list month after month
• fear that becoming an LLC will add lots of on-going administrative tasks to their to-do list

But I think both these lines of thinking contain misperceptions around LLCs.

What’s the big deal with LLCs?

For many of us, our personal lives and our business lives are intertwined. There isn’t much separation between them.

And when you are a sole proprietorship or partnership, that’s how the law treats you as well. Even if you have separate accounts, legally there is no difference. So if something goes wrong in one, the other is impacted.

• if you owe a vendor money, to collect they can go after your business and personal accounts
• if you stop paying your student loans, they can go after your personal and business accounts

But when you form an LLC, you put a fence between your personal life and your business life.

Which means when something goes wrong on one side of the fence, it stays there. It can no longer cross over and impact the other side.

• if something goes wrong with a vendor, client, customer, employee, or course participant—only the LLC assets can be used
• if you can pay a student loan provider, personal creditor, or medical bills—only your personal assets can be used

What’s the secret to knowing when it’s time to become an LLC?

If you’ve blown off becoming an LLC because you think you aren’t ready, then I want to share my secret to knowing when it’s time to become an LLC.

The secret has to do with a Mama bear.

Mama bears are incredibly protective of their cubs. You DO NOT, I repeat DO NOT want to get between a Mama bear and her cubs. They will fight to the death to protect them.

How this relates to the secret of knowing when it’s time to become an LLC is by looking around and thinking,

“Is there anything in my personal life I would fight to the death to protect if something went wrong in my business?”

For example,

• if you are a mom and own the home you are raising your children in, you might fight to the death to protect your home
• if you live in a community property state and your spouse’s income is supporting you, you might fight to the death to protect his/her income
• if you had a career before you started your business and you’ve got savings or stocks to support you while you build your business, you might fight to the death to protect that nest egg

If the thought of losing anything in your personal life would keep you awake at night, then you are ready for an LLC.

This secret is the core of the 13 questions I work through with my clients when making the decision. But this secret really only incorporates three of the 13 questions. So if my secret doesn’t sway you one way or another, you can grab a workbook walking you through all 13 questions here.

What’s the value of creating an LLC?

If you’ve procrastinated becoming an LLC because of time, costs, or red-tape, then I want you to understand the value of an LLC.

The real value of becoming an LLC is peace of mind and a changed perspective on your business. The first thing an LLC does for your business is peace of mind. It’s an insurance policy. It protects those things you hold dear if anything goes wrong.

Remember the old MasterCard ads?

• California Secretary of State filing to create your LLC: $70
• California Franchise Tax board LLC minimum tax: $800
• California Secretary of State filing fee to maintain your LLC: $20
• Knowing that your children are protected: priceless

It might sound trite. But after seven years of helping create LLCs, I’ve heard it time and time again. That creating an LLC is priceless.

Creating an LLC gives you the fence between those things that you would fight to the death to protect. You no longer have to worry when:

• dealing with an employee dispute if your savings account is safe
• a course participant threatens to sue you because she took your advice and her business tanked
• you host a workshop and someone accidentally sews their fingers

Because everything in your personal life is off limits. Everything you would fight to protect is safe.

And if sleeping better at night isn’t a good enough reason, there’s another big intangible benefit.

Time and time again, I’ve seen businesses grow by leaps and bounds in the year after becoming an LLC. This transition opens up what you imagine is possible for your business.

Your business turns into this “official” and “legit” thing. And this creates a mental shift in how you think of your business. You start to take on the role of a CEO. You make decisions based not on what a one-woman-shop would do, but what a business would do.

Now, I’m not saying that you should form an LLC for either of these reasons. But if you’ve passed the first test of having something you want to protect. These two things should be your motivation to finally tackle this task and get it off your list.

And if you’ve decided to move forward, you can grab this workbook walking you through the steps you’ll need to take.

Does that change your perception when it’s time to become an LLC or the value of being one? Share your thoughts in the comments.

-Kiffanie

*Click here to grab your seat in Kiffanie’s FREE workshop on 12.12.16 and for details. If you want to purchase the workshop so you can rewatch it anytime, Kiffanie has generously offered Dear Handmade Life readers $20 off for the All-Access Pass (use the code: DHL20).

ABOUT KIFFANIE:

Kiffanie Stahle is a photographer, fellow creative business owner, and lawyer living in Oakland, California. She’s on a mission to teach creative entrepreneurs that the law doesn’t have to equal scary. When she’s not chatting law, she’s probably in her garden, her kitchen, or if it is summertime catching a Giants baseball game. Sign up for her FREE LLC master workshop and finally cross “Become an LLC” off your to-do list.

Join Kiffanie on social media: Pinterest, Instagram, and Twitter.