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I started my LLC for a mix of practical and optimistic reasons. I was freelancing — writing, consulting, editing, researching — and figured, why not make it official?

I knew that if my business kept growing (and I fully intended for it to), I'd be glad I had taken the time to set up the proper structure early on. We talked about LLCs in my journalism business classes — how they provide legal protection and financial benefits — and it always stuck with me as something smart, serious professionals did.

Also, as a personal finance expert, setting one up also felt like a good hands-on experiment. Plus, my husband is a lawyer, and the moment I casually mentioned setting one up, he had it done by the weekend.

But I'm getting a little ahead of myself. First, let's talk about what an LLC actually is — because before I set one up, I wasn't entirely sure of all the details myself.

What is an LLC, and Who Uses One?

A Limited Liability Company (LLC) is a business structure that offers liability protection to its owners while maintaining flexibility in management and taxation.

LLCs are designed to keep your personal assets (like your house, car, and savings account) separate from your business assets (like your company's bank account, equipment, or inventory). This separation is crucial because if your business ever gets sued or falls into debt, only the business assets are at risk — not your personal belongings. For example, if your LLC is sued by a customer, they can go after the money in your business bank account, but they typically can't touch your personal savings or your home.

They're commonly used by small business owners, freelancers, consultants, and entrepreneurs who want legal and financial protection without the rigid structure of a corporation.

In reality, LLCs are used for everything from one-person Etsy shops to multimillion-dollar real estate investment firms. The versatility of an LLC is one of its biggest selling points, but it also leads to many misconceptions about what it actually does.

Honestly, I expected the process to be much harder. Forms, legal jargon, hidden fees — maybe even a mysterious government office where someone in a suit asks, "Are you sure you're ready for this?" But no. It was shockingly simple. And once it was done, I felt like I'd unlocked a new level of adulthood.

But while the setup was easy, what really surprised me were the myths — things I assumed about LLCs that turned out to be wrong. And of course, I wasn't alone. Even people who've been running businesses for years sometimes misunderstand what an LLC can and can't do.

So, let's bust some myths. If you're thinking about starting an LLC — or if you already have one but aren't sure what it actually does — this one's for you.

Myth #1: Setting Up an LLC Is a Nightmare of Paperwork and Legal Drama

Reality: If you can order takeout online, you can probably start an LLC.

Before I went through the process, I assumed it would take weeks, require multiple government offices, and possibly involve a notary, a wax seal, and a formal declaration of intent.

Instead, I filled out a form, paid a fee, waited a few days, and boom — official.

Turns out, my experience is pretty common. According to the U.S. Small Business Administration (SBA) for many states, LLC formation generally involves filing Articles of Organization with your state's Secretary of State office and paying a filing fee, which ranges from $50 to $500 depending on the state.

Some states do have extra steps, like New York, which requires LLCs to publish a notice in two newspapers (yes, really), but in many states, it's about as hard as signing up for a streaming service.

The hardest part? Picking a business name I wouldn't regret in a year.

Myth #2: Your LLC Has to Be for Just One Type of Business

Reality: LLCs can be general — so go ahead, be a multi-hyphenate.

When I was setting up my LLC, I thought I was going to have to settle on a single, hyper-specific lane for my business. Writing or consulting. Not both.

Turns out, I didn't need to pigeonhole myself. In most states, you're allowed to engage in multiple types of business under a single LLC, as long as they're legal and align with your business purpose statement.

I could cast a wide net — writing, consulting, research, analysis — all under one LLC. This was great because my work evolved over time. If I'd picked just one niche, I'd have boxed myself in unnecessarily. Heck, I could theoretically open an Etsy shop or a second business under my original LLC (although that might not always be the best strategy... but I still could).

In other words, your LLC can grow with you. Nice!

Myth #3: Having an LLC Means You're Immune from Being Sued

Reality: It helps, but only if you actually keep your business separate.

The whole point of an LLC is limited liability — it's right there in the name! — which means if someone sues your business, they can't come after your personal assets. But here's the catch... that only works if you follow the rules. And for LLCs, the biggest rule is that you don't mix business with personal.

If you mix personal and business finances — using your business card for groceries or your personal Venmo for payments — you risk "piercing the corporate veil," which is a fancy way of saying, "Nice LLC you have there. Shame if anything happened to it."

Now, maybe you're reading this and thinking, "Eh. Is it really that big of a deal if I charge a few groceries on my company card?" YES, yes it is.

A 2021 report from the National Federation of Independent Business found that nearly 40% of small business owners have faced a lawsuit at some point. And keeping your business legally distinct is crucial to maintaining your liability protection, which is the whole point of an LLC.

So, from day one, I made sure to open a separate bank account, use that account exclusively for business transactions (including paying taxes), and keep pristine records. Small habits, big protection.

Myth #4: LLCs Are a Magical Tax Loophole That Saves You a Fortune

Reality: You still have to pay taxes. And probably self-employment taxes.

I'd heard people say, "Get an LLC! It'll save you so much in taxes!" And I'll be honest, I was definitely looking forward to not paying so much to Uncle Sam. But... that's not necessarily the case. It's certainly not for me.

By default, an LLC is a pass-through entity, meaning all income flows through to your personal tax return. You still generally pay taxes like you would if you didn't have the LLC — the money you generate from your business is still taxed like normal income. No special tax magic.

The bottom line? You still have to pay your taxes. Bummer!

Myth #5: Everything Is a Write-Off

Reality: Some things are, but not as many as you might think.

So, the first year I had my LLC, my husband and I played this super fun game I like to call... Does That Count as a Write-Off?

Basically, I would try to make a case for why something, anything — vet expenses, new computer, housekeeper, certain subscription services, a trip to the lake — should count as a write-off for my business. And he would try not to roll his eyes out of his head.

According to the IRS, deductible business expenses must be "ordinary and necessary for your trade or business." Personal expenses, even if loosely related to your business, do not qualify.

So, yes, I can deduct things like software I use for my business, business-related travel, and my home office (which is exclusively used for work). And thanks to that home office, I also get to write off a percentage of what we pay for certain bills, like utilities and our housekeeper. Nice!

However, I cannot write off my dog (who is basically my coworker), my fancy espresso machine that fuels long writing sessions, or our trip to the lake even though I spent a few hours working on a consulting project while we were there.

LLCs Are Great — But They're Not Magic

Starting an LLC was easier than I expected, and it's been a great move for my business. But it's not a tax cheat code, a legal forcefield, or a free pass to write off everything I buy.

If you're thinking about starting one, make sure you know what it does, what it doesn't do, and how to use it properly. Keep your finances separate, don't expect wild tax savings, and be smart about deductions.

An LLC is a powerful tool — but only if you use it the right way.