Why I Moved from Freelancer to Company Owner

After “What do you do?” the second most common question I’m asked when someone meets me is, “Why did you choose to form a company?”

I understand the curiosity — especially when a freelancer is asking. After all, freelancers enjoy the freedom of running their own business, but don’t have to worry about business entity formation and related reporting paperwork with their state. They also likely don’t need to hire an accountant for bookkeeping, at least for a while after starting out.

When I first considered business formation this past summer — and imagined how I want to work, what I want to work on, and who I want to work with — I saw the most advantages and possibilities under the path of LLC formation.

In a bit more detail, here’s why I decided to form a company beyond merely a freelance business:

1. Reduced personal risk.

In my mind, the major con with freelance work — balanced against the pros mentioned above — is that if a client brings legal action, a freelancer’s personal assets are at risk. With an LLC, personal assets are walled off. That helps me sleep really well at night. 😴

2. More revenue opportunities and the highest level of consideration by a potential client or partner.

If you’re a freelancer who sells templates or other products — ie, selling anything other than your time and expertise for money — you’re really in a squishy area when it comes to taxation and regulation. Since I knew I wanted to be open to selling products as well as services, LLC formation or incorporation made the most sense to me.

Another related consideration was how seriously I wanted to be taken when it came to contracts for client work as well as other revenue generators like affiliate agreements/work. I assumed that a company would consider it a safer bet to work with another company, as opposed to working with an individual. This assumption was validated with an affiliate agreement I arranged months ago, as well as with another one I’m working on now. I am also subcontracting with my current main client, and am looking to do so with other companies (particularly B2B) when it comes to increasing the value they provide their clients in the area of website analytics.

3. The ability to hire employees and/or contractors.

LLC formation gave me an Employer Identification Number (EIN). While I have no plans to hire anyone at this point, I am set up to easily do so when I need to. I love that flexibility!

4. Expanded social media and online search presence.

For example, on LinkedIn, if you’re a freelancer and you claim your business as your “employer,” the “organization” pulls up in a LinkedIn search as a generic search — as opposed to as a business page. Forming a company allows you to create a full business page that’s separate from your personal LinkedIn profile. In turn, this results in 2X the presence for significantly less than 2X the marketing effort.

Likewise, freelancers don’t get the benefit of a Google Business profile, based on the business-related profile setup questions that Google asks.

If you’re a solopreneur who formed a business entity, why did you choose this path instead of freelance/1099 tax forms?

Does your reasoning differ significantly from mine? I’d love to hear your thoughts. Let me know here.