How to Start an LLC as a Freelancer
Updated June 2026 · Reviewed by the Hustle Copilot editors
Freelancing as a sole proprietor works fine — until a client claims your work cost them money, until you cross $40K in profit and realize how much self-employment tax you're paying, or until a big client requires an entity on the contract.
Why you need an LLC for this
- Client disputes over deliverables stay at the business level
- S-corp election after $50K can save thousands in SE tax
- Cleaner contract signing — clients prefer to MSA with an entity
- Easier to add a sub-contractor or partner later
The tax angle
This is where S-corp election shines. A freelancer netting $80K can save $4,000–$8,000/year in self-employment tax with an S-corp election on their LLC. Below $50K, the payroll overhead eats the savings.
Step-by-step
- Step 1Pick a state to form in
For most freelancer owners, your home state is the right answer. Forming in Delaware or Wyoming sounds clever, but if you operate from another state you'll have to register as a foreign LLC there too — double the fees and paperwork.
- Step 2Name your LLC
Search your state's business database to make sure the name is available. It must include 'LLC' or 'Limited Liability Company.' Avoid restricted words (Bank, Insurance, etc.) unless you have the right licenses.
- Step 3File your Articles of Organization
This is the legal document that creates your LLC. Filing fees range from $40 to $500 depending on the state. Most states process online filings within a few business days.
- Step 4Get an EIN from the IRS
Free at IRS.gov. Takes 5 minutes. You need it to open a business bank account, hire employees, and file taxes.
- Step 5Open a business bank account
Critical for the liability shield. The moment you mix personal and business money, a lawyer can argue your LLC is a sham and pierce the veil. Keep it separate from day one.
- Step 6Update client contracts and invoicing to the LLC
Send a new W-9 to every recurring client so the year-end 1099 lands in the business's name. Update your invoicing tool to bill from the LLC.
- Step 7Skip all of that and use Tailor Brands
Tailor Brands files your Articles of Organization, gets your EIN, sets up your registered agent, and drafts your operating agreement in one flow. Most people finish in under 15 minutes. If you'd rather not deal with state websites, this is the fastest path.
What people get wrong
- Continuing to receive 1099s in your personal name after forming the LLC
- Not collecting deposits or signed contracts before doing work
- Holding off on S-corp election long after profits justified it
FAQ
Should every freelancer form an LLC?
Below $30K-$40K in net profit, probably not. Above that, the tax savings and liability protection usually justify it within the first year.
Can I keep my current clients if I switch to an LLC?
Yes. Send a new W-9 with the LLC's EIN, and ask them to issue 1099s to the business going forward. No new contract usually required, though larger clients may want to re-paper.