I'm picking up a ton of freelance web design/application work, so I want to start a business...?

Question

What is the best entity for freelance web services such as design and app development? I live in Michigan, I'll be operating out of my house (for at least a year), and I'll never hire employees - it's a one-man show. Please list the reasons behind your answers. Thanks a ton! I've been looking at LLC's, Single-Member LLC's, simple DBA's (sole p). I'm confused...

Answer 1

If you are working at home, don't require a professional license, and have no employees, the easiest/cheapest is to just be a sole proprietor. You will need to register an assumed name (see the website for your state on "Doing Business" and it will explain how to do everything.). You have a low-liability business so you don't need the corporate protection.

You will need to fill out a detailed personal tax return in order to claim your office and other deductions. That means you have to use the office SOLELY as an office - no beds or gym equip can be in there. You will need to use an accounting software program like Quick Books to track everything and make invoices. You are in a high-profit business - you will need deductions BADLY as you don't have any expenses other than software and paper. You should consult a small business tax advisor - the Quick Books website has links to Q-books accountants in your area. If you both use the same books, then it is easier to work together.

After the first year, consult the advisor about an s-corporation as the tax benefits are better. The Q-books advisor can explain all that too.  In otherwords, get advise from a professional as to your specific circumstances. The small consultation fees will be worth the tax savings.

You are very fortunate and have a good business niche - be smart and do it right and it will reward you!!