A reader asks:
I am an independent freelancer and have a question about whether I need another business entity for a new line of business.
Over the last few years, I have operated two websites focused on environmental issues. Through these sites, I provide resources and tips on sustainable living and make money through advertising, affiliate sales and and e-books. I created an LLC to own and operate the websites and set up a separate checking account for the business. Recently, I decided to provide freelance writing services in addition to running my two websites. I set up another website using my personal name and have attracted a few paying customers. My question is: Can I provide freelance writing services under my existing LLC or do I need to create a new entity?
My take:
It is good to hear you have been thinking ahead and doing some proactive planning. Your situation is actually quite simple, because you have already taken the right steps of setting up an LLC and a business bank account for your other business ventures.
If you wanted to, you could set up another business entity for your freelance writing services. The benefit would be a separation of the assets and liabilities of each business. The drawbacks, though, would include the extra administrative requirements to set up and operate a separate company, setting up and maintaining a separate bank account, and additional tax reporting complexity.
I am a fan of taking the simplest approach, and the extra administrative and financial burdens are probably not necessary in your situation. I recommend that you use your existing LLC to provide writing services to your customers. You would just need to bill your customers using the LLC’s name and make it clear in any contracts and/or negotiations that you are providing services as a member of the LLC. For instance, if you are hired by XYZ to provide services, the contract would be between your LLC and XYZ, and you would sign the contact as a member of the LLC.
I hope this helps, and good luck with your new business!
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Disclaimer: The information presented on this site should not be construed to be formal legal advice nor the formation of an attorney-client relationship. Please contact a legal or tax professional to discuss the specifics of your situation.