I'm a freelance graphic designer and I've got a potential client asking for a contract. They want to work with an LLC, not an individual. I haven't formed one yet. I want to get it done right before I accept their project, but I'm not sure where to start or what really matters. Any advice on the essentials?
LLC setup
I want an LLC ready before accepting my first client
First thing: check your state's LLC filing fee and whether you need a registered agent. Most states require one, and you can be your own agent if you have a physical address there. Also, get an EIN from the IRS right after formation—its free and you'll need it for banking and taxes.
Do you actually need an LLC for one client? Not saying don't do it, but if it's a small project, the cost and paperwork might not be worth it. You could use a sole prop with a contract and insurance. But if you plan plan to grow, LLC is a good move.
I formed mine last year. The filing itself was easy, but the operating agreement and separating business finances are what really matter. Don't skip those. Also, check if your city requires a business license—that tripped me up.
Agree with northstar_jen on the operating agreement. Even single-member LLCs should have one. Banks sometimes ask for it when opening an account.
What state are you in? That changes a lot. California has an $800 annual franchise tax, for example. Some states are much cheaper.
Also consider an S-corp election later, but not right away. Talk to a CPA before you do that. For now, just get the LLC and keep personal and business money separate.
I'm in Texas. I'll look into the registered agent requirement and the operating agreement. Thanks for the pointers on the EIN and separating finances. I hadn't thought about the operating agreement being needed for a bank account.