Limited Liability Companies: Should Paralegals Form Them?

Paralegals who are self-employed have to contend with a lot of issues that employed folks don't.

• Health insurance.
• Home office.
• Keeping the computer and printer and Internet connection working (help!!)
• Finding work (where is your next assignment coming from?)
• Getting paid.

On the other side, there are major benefits to self-employment. Especially if you structure your business right. I will address briefly how I would do that but I want to caution you to investigate more carefully and don't take my word for anything — consult a good lawyer and do your homework.

I would never run a business as a sole proprietorship. That means I wouldn't run a business in my name or using a "dba" or "fictitious name." Why? Because that exposes me too much to lawsuits and liabilities.

What I would do is set up either a corporation or a limited liability company, or LLC. Current tax law in my opinion favors an LLC although the reason to do a corporation is if you are making a lot of money as it allows better choices for pension plans…although I doubt whether that consideration outweighs the disadvantages.

So let me tell you what I would do.

I would set up an LLC in my state and do all my business through the LLC. LLCs don't pay taxes. They have to file a return though. So that is an added expense. You have to file a state and federal return for the LLC, and the income or loss goes on that return and is passed through to your individual tax return.

You can write off all sorts of business expenses and home office deduction and so forth. And you pay the big tax, self-employment taxes, on net income rather than gross income.

Some people feel that self employment taxes are not due on LLC income depending on many factors. Talk to a good accountant, a CPA, about that. It all depends upon what your accountant says and how aggressive you want to be.

If something should happen and you owe money you can't pay back, if the LLC owes the money, you are more likely to be able to not suffer any problem with your personal credit. Note that professional liability or malpractice may involve you personally despite the LLC, so an LLC is no substitute for good insurance.

By insulating your business from your personal situation, you are not as likely to affect your personal credit by whatever happens in your business. That is a great thing.

Let me turn to another consideration. If you get involved in the lawsuit financing business, you will definitely want to use an LLC or corporation. It only makes sense. See Paralegals: Home based income opportunities, for more. Or also click on Lawsuit funding financial franchises - how they might work, for further info.

I am launching a franchise for the business of litigation funding and I hope you will get my free instant report on the business and join my exclusive private email list. I never share you iinformation anytime, with anyone, and you can opt out by clicking on a link at the bottom of every email. Just type your name and email now: