Shielding Your Assets: How Forming an LLC Protects Your Online Template Business

Last updated on April 23rd, 2024

Shielding Your Assets: How Forming an LLC Protects Your Online Template Business

Online template businesses can prove incredibly lucrative. To establish a foundation for long-term success, however, you’ll need to put in the work on the front end. Among other things, that means developing the right legal structure for your business.

While there’s no one solution that’s right for template businesses across the board, a majority of them benefit from LLC formation. An LLC, or Limited Liability Company, can yield many important benefits, not least some important legal protections. This post will take a closer look at the ways in which LLC formation can benefit online template services.

What is an LLC?

To understand the LLC, it’s first important to understand the alternatives.

When you start generating revenues from your online template business, the government will automatically classify your endeavor as a Sole Proprietorship. In a Sole Proprietorship, there is no legal distinction between you and your business. All of the assets are shared, as are all of the liabilities.

By contrast, registering an LLC actually establishes a new legal entity. It means you can keep personal assets and liabilities in one column, business assets and liabilities in another. This wall of separation can be really important, not least because it ensures personal wealth protection.

How LLCs Shield Your Assets

Think about it this way. If you’re running your online template shop as a Sole Proprietorship, and if you’re served with a lawsuit, you have no legal mechanism for shielding your personal assets, such as a family bank account, retirement portfolio, house, or car. After all, there is no legal distinction between you and your company. These things are very much on the table to potential litigators and creditors.

Not so when you register an LLC. Your LLC will allow you to keep personal assets off the table, meaning you can have some peace of mind that even a major lawsuit won’t jeopardize your family nest egg. In this way, the LLC designation provides significant peace of mind.

Other Benefits of the LLC

The LLC format can benefit your online template business in other ways, as well. Consider:

  • When you register your company as an LLC, you enjoy tax flexibility. LLCs can file on a pass-through basis, but they can also opt into corporate taxation when needed.
  • There is also much administrative flexibility. You can choose the management structure that works best for your business.
  • Registering an LLC involves minimal regulative overhead, with much lighter reporting requirements than you’d experience with a Corporation.
  • LLCs also confer credibility, making it easier to get a business loan or to court potential investors.

These are just a few of the reasons why it might make sense to establish your online template business as an LLC.

Registering Your LLC

The actual process of registering an LLC can vary a little bit depending on which state you’re in, but it’s usually pretty straightforward. Consider a few of the most common steps.

  • Select a name for your LLC. You’ll need to pick a name that isn’t already in use within the state of your choosing. For example, when forming an LLC in Florida, you’ll want to check with the Secretary of State to verify that your desired name is still available.
  • Appoint a Registered Agent. Your Agent is someone whose main responsibility is to receive legal and tax files on your company’s behalf. This can be an organization or just an individual, and for most LLCs the best option is to hire a third-party Registered Agent service.
  • Create an Operating Agreement. An Operating Agreement outlines the structures you’ll use to allocate profits and share responsibilities within the business itself. It’s not legally mandatory, but can help you avoid long-term legal disputes.
  • File Articles of Organization. This is the document you’ll need to formally establish your LLC as its own entity. When you file with the state, you’ll also need to pay the nominal filing fee, which can be anywhere from $15 to $300.
  • Claim an EIN. You can get your Employer Identification Number from the IRS, and if you’re a US resident then it should be free. You will need to have an EIN before you can file your taxes or process payroll.
  • Set up a bank account. Your online template business will naturally need a bank account. For the purposes of the LLC, it’s important to set up an account that’s distinct from your personal savings or checking accounts.

Position Your Template Business for Lasting Success

There are a number of steps you can take to ensure your online template business is positioned for success. Foremost among them is choosing the right legal structure, which usually means an LLC. Follow these steps to get your LLC up and running, providing your business with an important shield against litigation.

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