Do I need an LLC if I have insurance?
Asked by: Amanda Marquardt | Last update: August 19, 2025Score: 4.1/5 (40 votes)
At what point do you need an LLC?
When a business owner has personal liability protection, they can't be held personally responsible if the business suffers a loss. This means personal assets (car, house, and bank account) are protected. If your business already earns a profit or if it carries any risk of liability, you should start an LLC immediately.
Should I insure myself or my LLC?
If you have established an LLC, you have created a separate legal entity from yourself as a practitioner that can be sued, and business entity coverage is the only way to insure this. So, even if you are the only person there, business entity coverage is appropriate in protecting your career and assets.
Can you have a small business without an LLC?
An LLC isn't required to start a small business. If you're mowing lawns for money or selling carrots at your local farmer's market, you're already in business as a sole proprietor. If you bring on a business partner, you're doing business as a general partnership.
Is an LLC worth it for a 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.
Insurance or LLC: What You Need to Know
What is the downside to an LLC?
(But in many cases, the advantages outweigh the drawbacks.) Cost: An LLC usually costs more to form and maintain than a sole proprietorship or general partnership. States charge an initial formation fee. Many states also impose ongoing fees, such as annual report and/or franchise tax fees.
Should I pay myself a salary from my LLC?
LLC members don't need to pay themselves a salary, but doing so helps to separate personal and business profits, which can support your personal liability protection, among other personal benefits.
How much money can you make without an LLC?
This rule also applies to sole proprietors with incomes of less than $400 who meet other criteria mentioned in the Form 1040 and 1040-SR instructions. There is no exact income threshold for forming an LLC. However, experts recommend registering side businesses as LLCs when they've earned substantial income.
Should I put everything I own in an LLC?
Keep 'just enough' money in the company
If your LLC is sued, the money that is in the LLC can be used to satisfy a creditor, but your personal assets usually cannot. To limit your vulnerability, it makes sense to keep as little money as possible in the company and pay the rest to the owners.
What happens if there is no business insurance?
The median cost for a liability lawsuit starts at $54,000! Even a relatively mild injury, like a bumped head, could cost thousands of dollars in medical bills. If you don't have business insurance and you end up having to pay for these damages out-of-pocket, your business may not be able to recover financially.
How much money should you make before LLC?
“There's no hard and fast rule,” says Keren de Zwart, a business attorney who runs Not Your Father's Lawyer out of Irvine, California, “but if your business is netting at least $60K in profits, that's usually a good time to formalize into an LLC or corporation because the tax benefits can really start to be utilized ...
Do I have to put LLC on everything?
No, you do not need to put LLC in your logo or in any of your marketing materials. There is no requirement, legal or regulatory, to put “LLC” in your logo. Besides, putting “LLC” in your logo does not provide any additional legal protection for your business and can hurt your marketing and promotion in six ways.
Do I need an EIN for my LLC?
An LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms listed below. Most new single-member LLCs classified as disregarded entities will need to obtain an EIN. An LLC applies for an EIN by filing Form SS-4, Application for Employer Identification Number.
Do I file my LLC taxes with my personal taxes?
The IRS disregards the LLC entity as being separate and distinct from the owner. Essentially, this means that the LLC typically files the business tax information with your personal tax returns on Schedule C. The profit or loss from your businesses is included with the other income your report on Form 1040.
What is cheaper than an LLC?
A sole proprietor is generally a small business with no employees. It is the easiest and least expensive to form. As a "passthrough" business, your income passes through to your tax return.
Is it worth it to get an LLC?
You don't need an LLC to run a small business. However, an LLC can provide many benefits, including liability protection and tax advantages. Structuring your business as an LLC provides flexibility in tax classification.
What happens if my LLC doesn't make money?
Simply put, yes, you can have an LLC with no income, but that still has expenses. An LLC with no income but deductible expenses can offset future income through a net operating loss deduction. However, the IRS will still regard this as business activity, so it must be reported yearly.
What is my income if I own an LLC?
Your single-member LLC is a “disregarded entity.” In this case, that means your company's profits and your own income are one and the same. At the end of the year, you report them with Schedule C of your personal tax return (IRS Form 1040).
Should I get an LLC for side hustle?
An LLC Can Build Credibility and Trust in Your Side Hustle. An LLC Is Fast, Simple and Inexpensive to Create and Run. An LLC Gives You Flexible Ways to Own a Business and Distribute Side Hustle Profits. An LLC Helps You to Protect Your Privacy and Side Hustle Brand as You Scale.
How do LLC owners get paid?
However, you are not paid like a sole proprietor where your business' earnings are your salary. Instead, you are paid directly through what is known as an “owner's draw” from the profits that your company earns.
Can I transfer money from my LLC to my personal account?
That's called an owner's draw. You can simply write yourself a check or transfer the money for your business profits from your LLC's business bank account to your personal bank account. Easy as that!
Should I file s corp or LLC?
S corporation can employ their owners and pay them a salary. An LLC treated as a corporation can also pay owners a salary. If your LLC makes a profit after paying owners a reasonable salary, you might save money on taxes by electing S corporation taxation.