LLC Consulting: Everything You Need to Know
LLC consulting is an advisory service for entrepreneurs who are starting a limited liability company (LLC). 3 min read
LLC consulting is an advisory service for entrepreneurs who are starting a limited liability company (LLC). This business structure provides personal liability, along with the convenience of pass-through taxation in which profits and losses are reported on the owner's individual tax return.
An LLC is inexpensive to establish and requires only minimal annual taxes and fees in most states. This business structure also shields the owner or owners from personal liability for debts and legal judgments of the LLC, preventing the seizure of individual assets to pay these obligations.
The LLC establishes a trade name for the business, though this can also be achieved in some states by filing a Fictitious Name Certificate or DBA ("doing business as").
Starting a Consulting LLC
Consultants help other businesses by providing their expertise, experience, and skills in a specific area, such as:
- Information technology
Consultants assist with strategic planning, business efficiencies, and increasing revenue, along with a host of other areas. If you're considering starting this type of business, ask yourself the following questions to determine if consulting is the right fit:
- What are my specific skills? How can I differentiate my services from those of other consultants? It's not enough simply to market yourself as an IT consultant. Instead, consider specializing in a niche such as cybersecurity (see our page about cybersecurity and data privacy lawyers).
- Am I willing and able to market myself? This is essential for any consultant, since you'll need to network, sell your services to clients, and nurture those relationships.
- Am I a good time manager? Consultants will need to strike the right balance of billable and nonbillable activities to grow their business successfully and make a profit.
If you're already established as an independent consultant, forming an LLC can help take your business to the next level by creating a strong, professional market presence with the benefits of a formal business entity. As an LLC, you'll be able to obtain the trust of potential business and nonprofit clients and more successfully market your consulting services.
Establishing an LLC
While the guidelines for establishing an LLC vary by state, this is the general process you'll need to follow:
- Register your LLC with the secretary of state by filing articles of organization and paying the specified filing fee.
- Register with the IRS for an Employer Identification Number (EIN). This can be done by filing Form SS-4 by mail, fax, or online; it does not require a fee.
- Check with your local state and municipality to determine whether you need additional business licenses or permits to operate in your area.
- Contact Dun and Bradstreet to request a D-U-N-S number, which is a small business commercial credit score. This is often required to do business with government agencies and large corporations.
- Create a comprehensive business and marketing plan that outlines your LLC's purpose and mission, projects profits and losses, identifies your target market, and details strategies to reach this audience. You can download a template online from the U.S. Small Business Administration.
- Develop a logo and marketing tools, including a bio, brochures, business cards, and other collateral, along with a website and social media accounts.
- Access the resources of your local Chamber of Commerce and other networking groups. This will help you build connections and relationships that will prove valuable in your business.
- Develop and submit consulting proposals for key potential clients. Furthermore, monitor industry publications for request for proposals to which you can respond.
Advantages of Forming an LLC for Your Consulting Business
If a client sues you as a consultant and you lose, you are at risk of losing personal assets such as your home and vehicle unless you have established an LLC. While limiting your personal liability is the main benefit of forming an LLC, you can also access tax advantages. As a single-member LLC, your profits and losses are considered self-employment income. This can minimize your tax fees.
You can also opt to be treated as a partnership or a corporation for tax purposes if it is advantageous to do so. For example, taxation as an S corporation allows you to draw a salary while avoiding the double taxation of dividends.
If you need help with establishing an LLC for your consulting firm, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.