Should I establish a DBA or LLC to consult?

UPDATED: Oct 1, 2022

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Should I establish a DBA or LLC to consult?

I want to do some consulting/coaching on the side and am trying to figure out if I need to set up a DBA or LLC in order to do this work or if I can just do it under my name and SSN. What would the tax implications be for the options offered? Would companies prefer to do business with me if I had an LLC? Are there any other things I should take into consideration?

Asked on November 12, 2017 under Business Law, Georgia


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

1) There are no tax implications if you set up the LLC as a "disregarded" or "pass through" entity (i.e. elect "partnership," not "corporate" tax treatment). As the terms imply, profits and losses "pass through" the LLC, which is "disregarded" for tax purposes, and go directly to your own personal bottom line, the same as profits and losses would with a DBA. The treatment of a disregarded LLC and a DBA are the same: in either case, there is no double taxation, but rather profits are taxed on your own personal return.
2) A DBA offers NO protection against personal liability from business debts or suits against your business; if the business is sued or owed money, you are sued or owe money. While an LLC does not offer 100% protection (nothing is 100% in the law), it offers very substantial protection for you personally against business debts and obligations (other than obligations you personally guaranty, such as if you have to personally guaranty a loan or a lease). Set up an LLC--it may help save your life savings or home.
3) Many businesses do in fact prefer to deal with LLCs, since a) it helps ensure they can treat you as a contractor (1099) rather than having to pay you as an employee (W2), and b) it tends to look more professional.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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