Finally, it’s worthwhile to note that an LLC may involve several hundred or even a few thousand dollars of startup expense. For example, you may spend money on publications. You may buy the services of accountants and attorneys. You will need to print new letterhead, business cards, and envelopes (if you use these) that use the new LLC’s name in order to show the world that you’re now operating as a limited liability company.

So where does all this leave you? How should you balance the big benefits of forming an LLC with all the costs and drawbacks? Unfortunately, I can’t give you a one-size-fits-all answer. You’ll need to carefully consider the benefits and costs as they add up in your specific situation.

I will share these thoughts, however. In my opinion, an LLC is uneconomical for very small businesses—such as the very parttime, home-based business.

On the other hand, any time you’ve got a business that’s the way you’re making a living, an LLC economically reduces business risk and as an added bonus can even save the owners thousands of dollars a year in income or payroll taxes.

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