If you’re an Etsy seller, chances are your craft is your passion, and you’ve spent some time developing your skills as a maker. Not only that, but you’ve also had to learn how to use the e-commerce platform effectively and how to market your products to the right audience. However, you may not have thought much about creating a formal structure for your business. As an Etsy seller, you should be aware that as your sales increase, it becomes ever more important to protect yourself and your business by setting up an LLC.
Limit Your Risk
Creating a limited liability company, also known as an LLC, can benefit you as a seller because it limits your personal liability if your business has financial problems. Without an LLC, you and your business are legally the same entity, meaning that you are personally responsible for any debt your business incurs and for any judgment against your business in the case of a lawsuit. In fact, many business owners have forfeited their homes and personal savings in order to pay off debt after their business has failed. With an LLC, however, your personal assets are completely separate from those of your business, and this keeps you and your family safe.
Save On Taxes
LLCs have the ability to choose the tax status that fits them best, and with the help of a good accountant or CPA that can pay dividends in tax savings! By default an LLC is taxed as a sole proprietorship or partnership, but an election can be made to be taxed either as an S Corporation or a C Corporation.
Get Professional Assistance
Unless you’re already a legal expert, you’ll find it very difficult to set up an LLC on your own. The process is complex and requires a good deal of research to get the right paperwork and fill it out correctly. Of course, one way to get help setting up an LLC is to hire an attorney, but attorney fees can be cost-prohibitive, especially for a small business. If you’re just starting out, it may not be a realistic option to pay a private attorney to set up your LLC. Fortunately, there are some more accessible alternatives. In particular, there are LLC formation services that also offer experienced guidance and expertly prepared documents but at a much lower cost.
Build The Foundation
Creating an LLC builds a firm foundation for your Etsy business because an LLC will allow you to grow your business without fear and use what otherwise could be tax dollars to be reinvested into your business (or your pocket). By keeping your personal assets separate from those of your business, you risk only your personal investment in your business and not any other assets; this financial security gives you more freedom to experiment, expand, and diversify. The key to building a lasting foundation is to set up the business structure correctly and follow all the recommended steps to ensure that your future risk is limited.
Starting an Etsy business is a great way to make money by doing what you love, to connect with customers who truly appreciate what you have to offer, and to establish your identity as an entrepreneur. But remember that if you want to create a successful business, you need to plan for success. Setting up an LLC with professional guidance is the best way to ensure that your business can grow freely and safely while your own financial risk is held at a minimum.