As an independent programmer should I incorporate, Make an LLC, or just do business under my own name and how do I start that

by 12jonboy12. Posted on Sep 14, 2020    3    10

I've been offered a project has an independent programmer in the fairly near future but but I've always been hourly and never working under my own banner.

Should I start an LLC? I know if I start an LLC I'll be More protected as the LLC's assets will be the ones on the line not mine, but I don't know about the extra work involved and I don't know how much my assets are at risk really I'm just doing a contract job.

And if I don't need to start an LLC where do I need to start?

Please forgive the stupid question


avalpert 1

Business insurance is more important for you than an LLC - and shouldn't be expensive at all.

  12jonboy12 1

what should i get it to cover ?

avalpert 1

Any liability that may arise from your programming - be it something that results in financial loss or patent issues. An LLC won't protect your own personal actions, which are the primarily source of any liability you have, but insurance can.

chrisldavis 1

Everybody is wrong. In the scenario you have described, an LLC will give you very little asset protection. Why? Because you are the only person involved, and you will ALWAYS be held liable for your own tortious actions.

Here's an example situation: you write code for a client which includes credit card processing functionality. A bug in the software allows a hacker to access the database and they steal 100,000 credit card numbers. Lawyers want to sue. Do they only sue your LLC? Heck no, Jon Boy wrote the code, so Jon Boy himself gets personally sued.

Go ahead and start an LLC, but don't be deceived about the "protection" it provides. Trust insurance to cover your ass, not an LLC.

flapjackunicorn 1

Like others said an LLC mitigates risk by separating yourself from the business (hence the limited liability name).

There are also tax advantages as an LLC if you additionally elect to file taxes as an S-Corp (look up distributions) which become significant once you reach a certain amount of income

BigBalli 1

If you still need to start, do not worry about incorporating.

The only benefits come from liability mitigation and hiring people.

Confidence-Novel 1

As you said, LLCs and Corps protect you because they are legally not you. What you don't mention is WHY you might want to separate your business: risk.

Specifically, the risk of making an error in your work that costs your client money. So if you are programming something with any built in risks of losing your company money, yeah, look into LLC/Corp.

Other considerations:

Will this be your only job or will this be an ongoing thing? Each job increases risk. What do you own personally? House? Car?

Plenty of people operate as a sole proprietor for years without trouble, but then again people drive without auto insurance, too.

There's no one answer, unfortunately. A tax accountant or lawyer can help you look at the risks a little closer, and you can read more at reputable sites like, nolo, or the SBA -- but whatever you do, DON'T make your decision based on and internet forum :)

  12jonboy12 1

thanks, but other than my own research and advice from the internet i have noting, do you have any other advice on how I can go forward making this decision on my own?

I have very little (just out of school), its a scientific project, it does not make money but can certainly lose it or fail leading it to all be wasted money.

there is a reasonable probability of more jobs coming along, but after this one, i may be more financially prepared to hire a lawyer, so if it's not too risky, I may want to do business as myself for 6 months, then form an LLC, does that make sense?

I can't afford a lawyer or tax accountant at the moment,

berimtimlo 2

>As you said, LLCs and Corps protect you because they are legally not you.

But you have to be careful not to mix personal assets with the business. Which can be hard to be disciplined about when working as contractor. It also doesn't really protect you. Any sort of litigation where they try to pierce the corporate veil is going to cost a lot of money defend. Even if the LLC protects your assets you might go bankrupt from the legal bills.

For a contractor in OPs position buying professional liability insurance is way more protection than an LLC. It's a few hundred dollars a year and will pay your legal bills if it comes to that.

Confidence-Novel 1

Agreed! Insurance is another level/path to risk management. Glad you brought this up, might also be more cost effective/less maintenance over time?