Set up your consulting business

Why is this step important?

As an independent consultant, you’re now running your own small business. To do this effectively, you’ll want to protect yourself personally, and make sure you have a clear distinction between your personal life and your business. 

To make this happen, you’ll want an LLC, or Limited Liability Company. This company structure is easier to set up and more flexible than a traditional corporation, and protects your personal assets from your company’s liabilities 

A Business Entity (LLC):

If you’re going to consult, you do want a Limited Liability Company, commonly known as an LLC. The main benefit of having an LLC is in the name itself: limited liability.

When you operate as a sole proprietor (i.e. just yourself and your own name), you’re personally liable for everything. That means if a client or third party decides to come after your business because of a deal gone wrong, all of your personal assets could be at risk.

Having an LLC limits your liability by protecting your personal assets and separating them from those of the business. Even though it comes with a little more paperwork, most freelancers find that an LLC gives them greater peace of mind when running their business.  After all, we would hate to see your home or kids’ college savings put at risk.

From a tax perspective, the default position is that an LLC is considered a ‘disregarded entity’, which means it’s as if it doesn’t exist for tax purposes. The revenue through your LLC simply passes through to you as an individual. You’ll still report your business income and expenses on Schedule C in your personal income tax return. There are ways to use your LLC to reduce your tax bill, but more on that later.

We cover more LLC FAQs at the bottom of this guide.

There may be some annual fees levied by the State of incorporation to maintain your LLC in good standing, but these are not income taxes.  Most states also require an annual statement of information be filed for the LLC, again this is not a tax return and instead an informational filing for the Secretary of State.

Click here to if you’d like to read more about starting an LLC with Mylance’s recommended platform, Northwest Registered Agent.

Setting up your LLC

‍Click here to set up your LLC through our partner, Northwest Registered.

The base fee is $39 for formation, plus applicable state government fees set by your state. See instructions below:

Step 1) Once you arrive at the landing page, click “Let’s Get You Started”:

Step 2) Select “LLC” as the desired service, and below that, select the state in which you are based in the dropdown menu (for the purpose of this how-to, we will incorporate in California, as an example):

Once you select your state, you will see the applicable state registration fee appear for your state. These state-determined registration fees vary from $20 to $300+, depending on your state:

Step 3) Insert your desired name for your LLC, and insert a simple, one-sentence business purpose that represents the core business activity of your business. Once you have filled this out, click “Continue”:

Step 4) Select “Member managed” for your business governance type. Fill out the name of the person managing the business (your name): 

Step 5) Choose the address structure you want to be recorded with your state government. If you will be present at your own address most of the year to receive regular mail on behalf of your business, then select “Your mailing address” and fill out your regular mailing address:

Note ‼️If you reside or work away from your registered place of business more than half of the year, it is highly recommended that you select “Our registered agent address” to add a registered agent service (a representative designated to receive service of process and official mail on behalf of your business) to your LLC: 

Step 6) On the next two pages, create a password, then proceed to fill out your personal contact details, and then continue:

Step 7) On the “Optional items” page, you will want to elect for a Tax ID, assuming you want to open up a business bank account for your LLC:

Note ‼️If you expect your business to earn over $100,000 a year and/or you have employees, it’s advisable to select “S Corporation Election With The IRS” on the Optional Items page. Check with your accountant, and learn more about S Corps here.

Step 7) On the Payment page, insert your payment details and pay, and you are done! Depending on your state, it should take anywhere from 5-10 business days to be notified of your LLC registration with your state, directly by email through Northwest Registered Agent. You will also receive instructions in your email to login to your Northwest Registered Agent online portal to manage any necessary documents related to your LLC.

A few FAQs as you go through this process:

What state should I set up my LLC In?

• Set up your LLC in the state you live - this avoids paying unnecessary additional state fees.

Is the name of my LLC important?

• Honestly, no. It will only really show up on the contracts you sign. We recommend making the name of your LLC either something surrounding your name (e.g., BJacobs, LLC) or something else you like that sounds professional. 

How do I check if the name I want is trademarked?

• To check if a name is trademarked, search here (you’re looking for “Basic Word Mark Search”)

• Each state has a different website for the entity search to make sure the name you want isn’t already being used. You can find the right link for your state here 

Do I have to use the name of my LLC on all my marketing materials?

• If you’re thinking about calling your LLC one thing, but operating under a different name, it’s probably easier just to name your LLC the name you want to operate under.  
• If for instance, you have multiple revenue streams and really want to operate under a different name for one or more of them, you’ll need to register your ‘doing business as’ name (DBA) with the county clerk in which you live/operate.

What about business license requirements?

• Some local municipalities have business license requirements for businesses (usually all types of businesses, not just LLCs), and you’ll want to check your local city/county website to see if a business license is required.

Do I need to buy a registered agent service?

• When setting up your LLC, if you will be away from your registered business address often, it’s strongly advised to add a registered agent service to your LLC formation. A registered agent is a person or company designated to receive service of process and official mail on behalf of your business. Learn everything there is to know about registered agents here.  

What if I’m considering S-Corp status?

• An S-Corp is a tax classification, not a legal one. So you can have your LLC taxed as an S-Corp, and depending on your situation, you might take home way more money if you do. That being said, you do not need to decide this now. You can file the election later whether you do it on your own or have Northwest Registered make that change for you. (You can learn all about the difference between LLCs and S Corps here.) Please note this doesn’t change the underlying legal entity of an LLC - in the eyes of the State of incorporation you’re still an LLC from a legal entity standpoint and you’re subject to that State’s rules and fees. We’re happy to do that tax analysis for you if you’d like, just email us at info@mylance.co and we’ll set up a call with our top CPA to discuss.