Limited liability companies are hybrid business structures that combine the characteristics of corporations and partnerships or sole proprietorships.

If you work as a freelancer, there are some very good reasons why you should consider setting up an LLC, such as the following five. 

1.With an LLC, You Can Open a Business Bank Account, Which Will Bring Several Benefits

When you form an LLC, you will get a tax identification number for your business called an Employer Identification Number. Once you have that number, your business is a legal entity that is separate from yourself.

Thus, you can get a business bank account and build credit under the name of your business, rather than in your own name.

Having a business bank account can help you in various ways. For instance, it will be easier to keep track of your business income. It will also be easier to keep accurate records of your accounts and tax-deductible expenses.

And with a business credit card, it will be easy to pay for business expenses, such as a new laptop or office chair, and save money on those costs. 

Of course, having a business bank account will also make your financial life easier because you will have different accounts for your business and personal finances.

2.An LLC Provides You with Legal Protection

Another sound reason you should consider setting up an LLC is that you will gain asset and liability protection.

Without that protection, any legal or financial trouble that stems from your business could potentially expose you to personal liability. In turn, your assets, such as your home, could become vulnerable.

Also, when you set up your business as an LLC, you can sign contracts under your business name, which will further assist your personal assets being at risk in the event that someone files a lawsuit against you.

3.You Can Potentially Set up an LLC for a Low Cost

There are three ways in which you can start an LLC. 

Firstly, you can file your LLC paperwork yourself. By choosing this method, the filing fees will be low, ranging between $50 and $520.

However, to ensure everything is correct when filing and to save time, you could hire an attorney to file on your behalf. This second option is likely to be much more expensive. But having a dedicated attorney on board may be worth the expense if your business is complex.

The third option is to use an online LLC service that will help you with the paperwork. The costs of such services are much lower than the costs of attorneys. Some online LLC services start as low as $49. Plus, the companies often have additional services that can come in handy.

With such potentially low costs, it is more than worth setting up an LLC, seeing as an LLC brings many advantages.

Find out more about costs and how to start an LLC in this article.

4.An LLC Could Offer Tax Advantages

When properly managed, an LLC can potentially reduce your tax obligations.

It could also give you access to benefits that are unavailable to other types of businesses.

Because LLCs are able to mix tax structures, it is possible for your business to be taxed as a corporation or a partnership. In turn, that could lead to significant tax savings.

5.An LLC Can Improve Your Professional Image

Lastly, one good reason why an LLC can benefit freelancers is that it provides them with a professional image.

When you do things like sign contracts and present business cards under your business name, you will come across as more professional and be able to take your freelancing business to the next level.

This post was contributed by a guest author. Mainvest does not guarantee the accuracy of information in this post and does not provide legal, tax, or accounting advice.