LLCs for Side Hustles: 6 Reasons to Incorporate (2024)

A side hustle is a great way to dip your toe into the waters of entrepreneurship. And you'd be in good company, as nearly 7 out of 10 Americans have a side hustle.

If you feel that you really want to boost your income and turn your hustle into a more serious venture, then forming an LLC can be a great idea. The question is, at what point do you need an LLC for your side hustle? To answer that, we’ll break down the main benefits that a Limited Liability Company provides to help you decide if it’s right for you.

Let’s get into it.

An LLC Can Protect Your Personal Assets From Liability

When you form an LLC, it’s considered to be a “separate legal entity.” That means it has its own assets, bank account, debts and liabilities. Most importantly, all of those areas are considered to be separate from you personally. This means if another business or individual has an issue with your side hustle, then any action they take will be against the LLC and not you and your personal assets.

You will need to follow some rules to maintain this liability protection for your side hustle. Your LLC will need its own business bank account, and your LLC, rather than you personally, should be a party to any contracts you sign.

This separation of liability can give you tremendous peace of mind when carrying out your side hustle.

An LLC Can Build Credibility and Trust in Your Side Hustle

Whether you want to set your side hustle apart from others or you want to transform it into your main source of income, it’s vital to build trust and credibility with clients and customers. An LLC can help you achieve that. Because it requires effort to create and maintain an LLC, the fact you’ve put the work in tells others that you take it seriously.

An LLC can also be very helpful for negotiating with other businesses. Many banks will require you to have an LLC before you can open a bank account. Suppliers and business partners may also prefer to deal with an LLC because it means everything is a little clearer.

If you want to scale up your side hustle to a full-time income, then the extra credibility from being an LLC can boost your competitive advantage.

An LLC Is Fast, Simple and Inexpensive to Create and Run

You want to focus on running and growing your side hustle business, not figuring out share options, ownership structures or EBITDA! An LLC provides the perfect balance between owning a business and not having to spend too much time or effort on administering it.

You can pull together all of the information you need to file an LLC and make your application online in just a couple of hours. Once that’s done, your Secretary of State will form your LLC and you’ll have your shiny new business in as little as a day, with an expedited service.

Meeting the formal requirements of running your LLC is easy as well. You may need to file an annual report every year or two, and we can help you take care of that. From a tax situation, the bookkeeping and accounting for most LLCs will be almost identical to if you’re a sole proprietor.

Enjoy fast and effortless $0 LLC formation when you file your LLC through Bizee.

An LLC Gives You Flexible Ways to Own a Business and Distribute Side Hustle Profits

Your side hustle has taken off, and it's time to bring in new business owners. Whether you’re taking on partners or deciding the best way to split your profits, an LLC makes the whole process much easier.

You can use an operating agreement to manage the rules of your LLC — how you structure ownership, what everyone’s share of the profits will be and how you make important business decisions. An LLC also broadens your options for business ownership, as people don’t need to be citizens or residents of the U.S. to be owners.

If the day comes when you want to sell your business, that’s much easier to do if it’s all contained within an LLC. You can transfer ownership rights to someone else, with less hassle than if you were a sole proprietor or partnership.

Your LLC makes business ownership easy.

An LLC Helps You to Protect Your Privacy and Side Hustle Brand as You Scale

As your side hustle grows, you may want to move away from putting your own name on everything and create a brand that resonates with your audience. An LLC can help you do that. You can name your new business so it’s appropriate for your side hustle, or use a DBA to create a trading name.

LLCs help in other ways, too, by protecting your personal information. You can apply for an Employer Identification Number (EIN) and use that in place of your SSN on official forms and documents. You can then use your EIN when filing for certain types of taxes. You can even set up a virtual office and get your mail wherever you are in the world.

An LLC makes it easy to protect yourself and grow your brand.

An LLC Could Provide You with Some Big Tax Benefits

Finally, your LLC can reduce your tax burden. If your side hustle is earning a good amount of money, you might consider forming an LLC but filing taxes as an S Corporation. This lets you reduce your self-employment tax by paying yourself through a combination of a salary and distributions.

This can get a little bit complicated, but if you’re prepared to put the work in, you could reduce your taxes by a few thousand dollars a year.

So, at what point do you need an LLC? We'd suggest that if your side hustle is really taking off, then the best time is right now. Take advantage of Bizee’s $0 LLC formation, and start the next step in your business journey today.

LLCs for Side Hustles: 6 Reasons to Incorporate (2024)


Should I have an LLC for my side hustles? ›

An LLC Can Build Credibility and Trust in Your Side Hustle

An LLC can help you achieve that. Because it requires effort to create and maintain an LLC, the fact you've put the work in tells others that you take it seriously. An LLC can also be very helpful for negotiating with other businesses.

When to incorporate a side hustle? ›

While there is no magic number of when the amount of money justifies incorporating the cost of incorporating is a few hundred dollars and you will have to file a separate business tax return, so as soon as the revenues can cover those fees, you should consider it.

What is the best business structure for a side hustle? ›

For most side hustles, a sole proprietorship is the simplest structure, and if your side hustle doesn't have significant liability risk, for many it's the way to go. Having a sole proprietorship for your business has advantages: It's easy.

What are the three main advantages of the LLC? ›

What is an LLC? Definition and steps on how to form an LLC. A limited liability company (LLC) is a popular choice among small business owners for the liability protection, management flexibility, and tax advantages this form of business entity can provide.

Which is better for taxes, LLC or sole proprietorship? ›

Generally, you won't pay less in taxes as an LLC than a sole proprietor. However, you do have more tax flexibility with an LLC because you can select how you will be taxed.

Do I need a tax ID for a side hustle? ›

Do I Need an EIN for my Side Hustle? Not every side hustle needs an EIN. If you are a sole proprietor running a side hustle and excluded from the IRS list, you aren't required to get an EIN or even register your business with the government.

How to use an LLC to make money? ›

There are a few different ways to make money with an LLC. You can generate revenue through business activities such as sales, services, or product manufacturing. You can also earn money by investing capital in other businesses or through real estate holdings.

Which side hustle is most profitable? ›


Freelancing is a tried-and-true way to earn extra money and deserves a top spot on any list of easy side hustle ideas. Freelancers deliver work on a per-project basis for one or more clients and you can schedule it in your spare time.

Why is LLC good for small business? ›

An LLC lets you take advantage of the benefits of both the corporation and partnership business structures. LLCs protect you from personal liability in most instances, your personal assets — like your vehicle, house, and savings accounts — won't be at risk in case your LLC faces bankruptcy or lawsuits.

What do LLCs protect you from? ›

What Type of Liability Protection Do You Get With an LLC? The main reason people form LLCs is to avoid personal liability for the debts of a business they own or are involved in. By forming an LLC, only the LLC is liable for the debts and liabilities incurred by the business—not the owners or managers.

Is it better to pay myself from my LLC? ›

One advantage of paying yourself a salary as a member is that wages are considered operating expenses for the LLC, enabling members to deduct them from the LLC's profits for tax purposes.

What is the disadvantage for LLC? ›

Members must immediately recognize profits

Unlike corporations, LLCs must recognize profits as soon as they are earned. This can be a disadvantage for businesses that are seasonal or have irregular income streams, as it can cause them to pay taxes on profits that have not yet been realized.

Should I set up an LLC for my investments? ›

The management flexibility, tax benefits and protection of personal assets offered by LLCs make it a great vehicle for investment opportunities. Since there can be more than one member, it's often the business entity of choice when multiple people are looking to invest in something as a group.

Why do investors not like LLCs? ›

One is because an LLC is taxed as a partnership (pass-through taxation) and will complicate an investor's personal tax situation. By becoming a member of the LLC to invest in it, the investor will be taxed on the LLC's profits even if receiving no cash distribution personally.


Top Articles
Latest Posts
Article information

Author: Msgr. Refugio Daniel

Last Updated:

Views: 6093

Rating: 4.3 / 5 (74 voted)

Reviews: 81% of readers found this page helpful

Author information

Name: Msgr. Refugio Daniel

Birthday: 1999-09-15

Address: 8416 Beatty Center, Derekfort, VA 72092-0500

Phone: +6838967160603

Job: Mining Executive

Hobby: Woodworking, Knitting, Fishing, Coffee roasting, Kayaking, Horseback riding, Kite flying

Introduction: My name is Msgr. Refugio Daniel, I am a fine, precious, encouraging, calm, glamorous, vivacious, friendly person who loves writing and wants to share my knowledge and understanding with you.