1. Liability. #1 You need to protect yourself from liability as much as possible. A LLC can protect your personal assets from lawsuits while allowing your business income to pass through to you. Having an LLC is only part of it. You need to use your LLC. Have your domains, CPA accounts, PPC accounts, bank accounts, everything used for your business, in the company name using the company tax id number. Note that an LLC will not protect you from criminal liability. Also note that I am not a lawyer and that laws vary one place to another.

2. Taxes – Several US states have no income tax. You can save some money on taxes with an LLC but to justify it for this reason alone, you probably need to be making $10K or more per month. You still need to pay federal taxes and if you live in a state with income tax you will generally still be paying taxes to your state for any salary or bonus you take.  If you are making big bucks, there can still be tax advantages but you should be talking to a tax planner to set it up right. If you don’t do things right, an LLC can be a tax liability putting you in the position of paying taxes twice. Be careful with this. But if you ARE making big bucks than it will be worth it to set yourself up properly. For example, if you are banking a $million per year, you can leave the assets in your company which may be taxed at a lower rate than you. The company can also do clever things like own your home and car or pay for your health insurance and have an “employee” retirement plan.

3. Stability – It’s a big temptation to spend your money in the good times and be broke in the bad times. Personally, I live on a fixed salary which I draw from my LLC. Anything over my salary stays in the company accounts and is building up to become a warchest I can use when it’s time to take things to the next level. My plan is to have my LLC own rental properties which will provide  hedges against inflation and loss of income.

4. Security – Got PPC accounts? CPA accounts? An Adsense account? Well if you have an LLC, it has it’s own tax id number and can have it’s own accounts separate from your own. If you lose a critical account of some sort, having an LLC in place can offer you a way to get your foot back in the door quickly. If you’re smart you’ll have backup accounts ready to go before you have a problem. Be careful here. Lots of people use this as a technique which may violate user agreements with some companies. For increased protection from loss of critical business accounts, you might want to use a registered agent service which gives you a different (forwarded) address for the business and further isolates it from you. This can give you access to credit cards with multiple addresses which you may enjoy.

5. Trust – If you live in certain countries you may find it more difficult to get approved for CPA accounts etc. If you have run into this problem and want to avoid it in the future you can set up a USA based LLC and legally it is as if the company is a US citizen. Your company lives here, pays taxes here, and can get in trouble with the law here. It can be sued or even fined for criminal offenses. The Limited Liability Company gives you a US presence. With a registered agent service, you have a USA based address which will forward all mail to you wherever you may be.

6. Estate planning – If you have kids like me and plan to be mega rich, you have to figure out how to set up your estate. My “Wyoming Close LLC” allows me to make my kids members of the company. The company can own assets like real estate. When they inherit the estate, the Wyoming Close LLC will reduce their tax liability by about 50%. It also provides a form of protection you’d never think of but which I like. Should one of my 5 kids get divorced after inheriting their membership in the company, their ex-spouse cannot touch or acquire any share of the company. It essentially functions as a bulletproof prenuptial agreement for all my kids.

THE ULTIMATE PROTECTION: If you are a big affiliate and are playing chicken with the FTC, or consider yourself at higher risk of lawsuits, you might want to consider having businesses set up overseas which in turn operate in the USA. I can’t provide any advice to this end. Remember, I’m not a lawyer. But if you have a foreign company structure like this, then if anybody wants to sue you or come after you, then they’ll have to pay for lawyers in the USA and in whatever country you’re based out of. Of course so would you but you’re rich right? Anyway, it is possible to have multiple jurisdictions like this which increase the barriers for legal actions against you. Personally, I’m not operating in a very high risk fashion at all and a USA LLC is good enough for me.

Can you tell us another good reason for having an LLC or do you have experience with foreign entities? Please let us know in the comments.