We get this question all the time - do you need to start an LLC to be a business? The simple answer is no. There are nuances to that, but in general, as long as you make business income, you're considered a business in the eyes of the IRS.

Also answered in this video: 

• Do I have to open a business bank account?

• How much do I set aside for taxes?

Now, to choosing the right business entity for what you have right now - watch the video above and share your thoughts and questions below.

Which business entity to create

DBA (Doing Business As)

WHY: easiest and cheapest option, separate tax ID to open business account

WHEN: if you want to accept payments under a business name

HOW: LegalZoom

KEEP IN MIND: does not protect your personal assets, high audit risk

LLC (Limited Liability Corp)

WHY: protect your personal assets in case of lawsuits

WHEN: if your line of work is high liability (do people get sued a lot?) 

HOW: use attorney if possible

KEEP IN MIND: might be expensive to file; NO tax benefit, high audit risk

S-corp

WHY: protect personal assets, low audit risk, lower tax liability, take wages/salary

WHEN: business > $150k

HOW: use attorney or accountant if possible

KEEP IN MIND: corporate tax returns, payroll, formal bookkeeping

WHY: protect personal assets, low audit risk, lower tax liability, take wages/salary

WHEN: business > $150k

HOW: use attorney or accountant if possible

KEEP IN MIND: corporate tax returns, payroll, formal bookkeeping

 Do I have to open a business bank account?

• The main objective is to SEPARATE personal and business expenses

• You can start with just a 2nd personal checking account

• You can also start with a credit card you don’t use regularly and make a habit of using for business expenses

• If you have a tax ID for the business (which would be issued with a DBA, LLC, or scorp), you can open a business checking account

How much do I need to set aside for taxes?

• As a safe bet, set aside between 25-30% of all income you make for taxes

• Bonus! Open a high-yield savings account for taxes and earn interest

• Quarterly taxes - due on 4/15, 7/15, 9/15, and 1/15 (the next year). Have your accountant put together quarterly tax vouchers