Do I Need an LLC for My Virtual Assistant Business?
Starting a limited liability company (LLC) for your virtual assistant business can provide several benefits.
Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.
For a virtual assistant business, lawsuits can arise from things like loss of opportunity allegations, as well as accidental leaks of confidential information (i.e., as a result of working with more than one client).
LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your virtual assistant firm seem more credible.
Recommended: Use Northwest to form an LLC for $29 (plus state fees).
Should I Start an LLC for My Virtual Assistant Business?
LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.
You should form an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.
LLC Benefits for a Virtual Assistant Business
By starting an LLC for your virtual assistantbusiness, you can:
- Protect your savings, car, and house with limited liability protection
- Have more tax benefits and options
- Increase your business’s credibility
Limited Liability Protection
LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.
Virtual assistant businesses will benefit from liability protection because of the risk of professional liability, property damage, personal injury, intellectual property breaches, and financial data breaches.
Example 1: Your employee schedules an important work appointment for a client one week later than he was supposed to. As a result, the client alleges that your company has caused him to lose $20,000, and he files a loss of opportunity lawsuit against your LLC. Regardless of how the case progresses in court, your personal assets will remain protected from the claimant as a result of your limited liability in law.
Example 2: While responding to a client’s email, an employee accidentally forwards the wrong information, leaking another client’s confidential information. If the second client was to sue your virtual assistant business, you would not need to use your personal assets to compensate the claimant — assuming that you didn’t act negligently — even if your business’s assets are unable to.
Example 3: You find a suitable lease and decide to rent out a business office in your LLC’s name. If you are unable to cover the cost of the lease in the future, the landlord will not be able to use your personal assets as a result of your company’s LLC classification.
An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.
To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.
LLC Tax Benefits and Options for a Virtual Assistant Business
LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.
The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.
Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.
S Corp Option for LLCs
An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).
S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.
The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.
In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.
We estimate that if a virtual assistant business owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.
You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.
Credibility and Consumer Trust
Virtual assistant businesses rely on consumer trust. Credibility plays a key role in creating and maintaining any business.
Businesses gain consumer trust simply by forming an LLC.
A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.
Northwest will start an LLC for you for just $29 (plus state fees).
How to Form an LLC
Forming an LLC is easy. There are two options for forming your LLC:
- You can hire a professional LLC formation service to set up your LLC for a small fee
- Or, you can choose your state from the list below to start an LLC yourself
Select Your State
- Alabama LLC
- Alaska LLC
- Arizona LLC
- Arkansas LLC
- California LLC
- Colorado LLC
- Connecticut LLC
- Delaware LLC
- Florida LLC
- Georgia LLC
- Hawaii LLC
- Idaho LLC
- Illinois LLC
- Indiana LLC
- Iowa LLC
- Kansas LLC
- Kentucky LLC
- Louisiana LLC
- Maine LLC
- Maryland LLC
- Massachusetts LLC
- Michigan LLC
- Minnesota LLC
- Mississippi LLC
- Missouri LLC
- Montana LLC
- Nebraska LLC
- Nevada LLC
- New Hampshire LLC
- New Jersey LLC
- New Mexico LLC
- New York LLC
- North Carolina LLC
- North Dakota LLC
- Ohio LLC
- Oklahoma LLC
- Oregon LLC
- Pennsylvania LLC
- Rhode Island LLC
- South Carolina LLC
- South Dakota LLC
- Tennessee LLC
- Texas LLC
- Utah LLC
- Vermont LLC
- Virginia LLC
- Washington LLC
- Washington D.C. LLC
- West Virginia LLC
- Wisconsin LLC
- Wyoming LLC
For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.
Should I Start an LLC FAQ
Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.
Visit our LLC vs. Sole Proprietorship guide to learn more.
At a minimum, you’ll need general liability insurance.
Read our Small Business Insurance article for more info.
You can start a virtual assistant business with a very low budget. This is because you will generally only need to have a strong internet connection and a work laptop. If you hire staff to help you run your business, you will also need to factor in the cost of labor, as well as business insurance.
Visit our How to Start a Virtual Assistant Business guide to learn more about the costs of starting and maintaining this business.
The ongoing expenses of running a virtual assistant business include utilities, marketing, equipment maintenance, software subscription, and insurance.
Learn more about running a virtual assistant business.
Virtual assistant businesses make money from fees for their services. You can charge hourly-based or project-based fees.
Learn more about starting a virtual assistant business.
A virtual assistant business offers remote assistant services to individuals, businesses, and events. Many businesses and entrepreneurs choose virtual assistants to avoid the costs of hiring employees.
Although it is difficult to estimate the size of the market, virtual assistant businesses are quickly gaining in popularity. The average profit margin for a virtual assistant business needs to be at least 35% to be sustainable.
Learn more about starting a virtual assistant business.
