So I've been doing freelance design work for about two years now, pulling in around $4-5k/month consistently. I never registered an LLC or anything, just been taking payments via PayPal and Venmo into my personal account. Someone mentioned I should probably get a separate business bank account but I'm not sure where to start. Do I need to formally register before I can open one? Also worried about taxes - I've been filing as self-employed with Schedule C. Am I already doing something wrong?
freelancing
I'm making decent freelance income but haven't registered a business
Not wrong per se, but you're leaving yourself exposed. The main reason people form an LLC is liability protection. If a client sues you, your personal assets are on the line if you're a sole prop. That alone was enough for me to file.
You can open a business bank account as a sole proprietor too, you don't need an LLC for that. Just need your SSN and maybe a DBA if you're operating under a different name. Way easier than most people think
Two years at $50k and no business account? Your bookkeeping must be a nightmare lol
Schedule C is correct for sole prop so you're not doing anything illegal. But commingling funds in a personal account is risky if you ever get audited - harder to prove what's business vs personal.
Also depending on your state, registering an LLC is cheap. Mine was like $50 and took 20 minutes online. The annual report fee is the annoying part but its manageable.
What state are you in? That changes the answer a lot. Some states have stupid high LLC fees. California charges $800/year just to exist as an LLC which is brutal for a freelancer.
I'm in Texas, forgot to mention that.
Texas is cheap for LLC filing, $300 one-time. No annual fee. Pretty good setup actually.
wait you you're in texas and haven't filed? texas is one of the easiest states to do it in. just go to the secretary of state website, fill out the form, pay the $300, done. you don't even need a lawyer.
One thing nobody's mentioned: an LLC doesn't protect you from personal negligence claims, just contract/business debts. So if you're doing design work, the liability protection is honestly pretty limited unless you're hiring people or carrying serious inventory.
True but it also makes yoy look more professional to bigger clients. Some companies won't even sign a contract with a sole prop. That was worth more to me than the liability stuff honestly.
I've been freelancing for 6 years years as a sole prop. No LLC. No business account, just a sepaarte personal checking I only use for work. Works fine. The "you NEED an LLC" crowd is overstating it for solo designers. If you're not hiring people or doing high-risk work, the cost and paperwork might not be worth it. Just get a separate bank account and pay quarterly estimated taxes.
^^ but if you get a separate personal account and treat it as business, banks can still shut it down for violation of terms. It's rare but it happens. Credit unions are more chill about it though.
This thread went from "how do I open an account" to "actually you don't need any of this" real fast
lol fair. Look, the honest answer is: separate account is step one regardless. LLC is step two if you want liability protection or bigger clients. Don't overthink it. Start with the account.