As a consultant, you’re the expert people need. There are a lot of benefits to creating an LLC for your consulting services. Here’s what you need to know.
What’s an LLC for Consulting?
Let’s start with the basics.
An LLC, or limited liability company is a business structure that helps protect your personal assets. Defined by the state you register your business in, an LLC for consulting services separates your personal assets from business liabilities.
In the unlikely (but possible) event that your business is sued, your home, cars, and other personal possessions aren’t at risk. Creating an LLC for consulting services helps protect you from personal bankruptcy, wage garnishment, and credit disruption.
Should You Form an LLC for Your Consulting Work?
Whether you’re a one-person consultant or a consultancy firm, creating an LLC for your consulting services comes with benefits. In addition to shielding your personal assets from liability, an LLC can give your services credibility. You’re an expert in your field and want to command top dollar for your knowledge, insights, and solutions. An LLC can help lift you out of the freelance category.
Logistically, your consulting LLC lets you tap into the benefits businesses enjoy. For example, you can open a business bank account. This keeps the finances of your business separate from your personal finances. This simplifies your bookkeeping and complies with legal requirements.
Forming an LLC comes with tax flexibility such as deductions and benefits you otherwise wouldn’t have access to. Should you decide to expand your services, an LLC can provide legitimacy that makes raising capital easier.
The Benefits of Creating an LLC for Consulting Services
| Protect Your Personal Assets | Business Credibility | Tax Status Options | Easy to Form and Maintain |
|---|---|---|---|
| If someone brings legal action against your business, your personal assets are protected. It makes your business a separate legal entity. You can make decisions without fearing a total loss. | Having an LLC elevates your consultant work from freelancer to business. Depending on your target audience, this simple positioning can open higher-paying opportunities. Credibility is everything, especially when it comes to consultant work. | LLC’s default tax structure is a pass-through benefit, you can also choose to be taxed like an S-Corp. A pass-through tax status means your earned income flows to personal income. Choosing to be taxed like an S-Corp gives you additional benefits if your revenue warrants the change. | With our process, an LLC is easy to form. It’s also easier to maintain than a corporation. Just click Start My Business, and we’ll take it from there. And we help you stay compliant, freeing you to focus on your services. |
Our 5-minute process makes it quick and easy to form a business in your state.
- Choose your business name.
- Click Start My Business to register your LLC.
We can handle every part of your LLC formation:- Business structure designation
- Registered agent services
- Operating agreement creation
- File Beneficial Ownership Information (BOI)
- Employer Identification Number (EIN)
- Opt in to open your business bank account with Relay Bank
We get you up and running as quickly and as easily as possible so you can start turning your business ownership dream into reality. See how it works. - Get the required licenses. Many regulations depend on your business operations.
- Meet your local compliance requirements while you’re in business. Don’t worry! We specialize in helping you stay compliant.
Move from Freelancer to Business Owner With an LLC for Your Consultancy
What to Consider When Creating an LLC for Your Consulting Business
You’re the expert called in to help an organization find solutions to problems. It’s time to level up, and you find yourself asking, “Should I form an LLC for my consulting work?” Here’s everything you need to consider.
Decide Your Business Structure
Choosing the right legal structure is the first step in setting up your consulting business. Each type has pros and cons.
Sole proprietorships are the easiest structures if you’re the only one in your business. As a consultant, this is likely the case. The drawback is your personal assets aren’t protected in the event someone sues you.
As already discussed, LLCs, or limited liability companies, protect your personal assets from business liabilities. As a consultant, you can have a single-member LLC. You then benefit from the flexible taxation options. This is why we recommend registering your business as an LLC.
A corporation is a structure that supports outside funding and growth at the highest levels. These are complex structures to register and to keep compliant. We can help with both if this is your plan.
Need help? Use our tool to determine the right business structure for you.
Name Your Business
A business name can set you apart from just an independent contractor or freelancer. People work with businesses they know, like, and trust. Your name differentiates you.
Your business name is an integral part of your brand identity. Start by brainstorming names that reflect your ideal client and your values. If you have a niche, your LLC’s name should reflect it.
To prevent you from choosing a name already in use, check your state's business registry for name availability. You can usually do this online through your state's Secretary of State website or business registration portal. Conducting a trademark search using the United States Patent and Trademark Office's database is another step to take. This ensures your chosen name isn't already trademarked by someone else.
Once you have your name and structure, you’re set to file your LLC!
Create a Business Plan
A business plan details your objectives, strategies, financial projections, and operational specifics. You find clarity for both you and others in a properly done business plan.
There are several different formats for writing a business plan for your company. Most plans include these sections:
- Executive summary
- Company description
- Market analysis
- Organization and management
- Products and services
- Marketing and sales strategy
- Funding needs and requests
- Financial plan and projections
Viewing your business both holistically and in detail helps get everything out of your head. Writing it down helps you spot gaps and holes.
Define Your Expertise and Claim Your Niche
A consultant leverages their experience in an area. It’s this experience that then informs your niche. Perhaps you have expertise in a specific industry, in solving a specific challenge, or in implementing a certain solution.
Before someone can hire you, they need to believe you are the right person for their needs. When you make it clear what you offer and to whom, you stand out in a crowded field. You attract clients you want to serve.
They’ll hire you for your problem-solving skills, communication abilities, and collaborative nature. They’ll retain and refer you when you get the results they want.
Define Marketing Strategies and Sales Processes
Communicating your expertise and niche comes through in your marketing strategy and sales process.
Attracting your ideal customers requires you to address 3 main aspects of your consulting LLC:
- Branding
- Marketing
- Sales
A strong brand can differentiate your business from the crowded field. Your brand personality includes your key brand messaging and visual identity.
Focus on building your personal brand. As a consultant, potential clients will connect with you, first and foremost. When you have a strong brand, you show up consistently and create trust with your buyers.
Develop effective marketing strategies, specifically lead-generation techniques, to ensure business comes in. These include taking advantage of online marketing opportunities, networking events, and business referral programs. Don’t forget retention efforts.
Your sales process is vital to your customer’s experience. When someone has a good experience with your business, they’re more likely to hire you again and recommend you to others.
Set Your Rate
Proper pricing ensures you're compensated fairly while remaining competitive. Know what others are charging and what your ideal clients are expecting to pay.
Consulting rates vary by
- Industry standards
- Client size and budget
- Your expertise and reputation
- Project scope and length
Consultants charge by the hour, the project, and sometimes by result. Know what your options are and define your rates accordingly.
Actively Network
Building a solid professional network is key for consulting work. It can lead to referrals, partnerships, and opportunities for growth.
Because your product is you and your expertise, tap into your existing relationships. Maintaining up-to-date and accurate social channels can be a great way to publish your opinions. Become a thought leader in your field.
When people know what you do and how you do it, they’re more likely to recommend you. Forming authentic relationships is crucial.
Join industry organizations, volunteer in the communities you serve, and stay in touch with decision-makers. This is part of creating a successful network.
As your area of expertise evolves, you need to be on top of changes. Staying up-to-date with industry trends and best practices enhances your value proposition.
Continue Your Education
Experts are only as strong as their knowledge is current. Know the trends in your industry and stay informed about what’s affecting your industry. Even if it doesn’t directly affect you, if it affects your clients, you need to know about it.
For consultants trained in specific solutions, such as Emotional Intelligence or change management, this is important. While the foundation of these philosophies remains the same, they evolve. Over time, we learn new ways of implementation and adjustments.
As societal standards change, so too should your ability to adjust. It’s about keeping up with the times. After all, organizations often hire consultants because you have time and space to stay informed.
Develop Interpersonal Skills
As the outside party, your presence may create both excitement and fear. While organizations bring you in to be objective, the teams you work with may worry. You’re the outsider.
Skills such as conflict resolution can never be sharpened enough. Constant development of your interpersonal skills is a wise investment.
Learning communication techniques is a great way to retain clients and encourage referrals.
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