The consulting LLC, state by state.
Consultants, advisors, fractional executives and freelance professionals mostly run through an LLC: one owner, one business account, invoices in the company's name. The entity is the straightforward part. The decisions around it are not, and the largest of them, the S-Corp election, is answered differently depending on which state your LLC sits in. Pick yours.
Four things that decide the setup.
An advice business carries almost no inventory and a good deal of exposure. What matters is the shield, the tax election, whatever licensing your field involves, and keeping the money visibly separate.
What the shield covers
The LLC puts the business's obligations on the business. It is not insurance and it does not answer for your own professional negligence, which is why professional liability cover sits alongside the entity rather than instead of it for anyone giving advice for a living.
S-Corp once it pays
An LLC can elect to be taxed as an S-Corp. Income splits into a W-2 salary and distributions, and the distribution portion is not subject to self-employment tax. It only makes sense above a level of profit, because it brings payroll and a separate return with it.
Reasonable salary scrutiny
The salary half of that split has to be defensible. Setting it low to shrink the tax is the part that draws attention, and the figure has to be one you can explain by reference to the work being done rather than the tax being avoided.
Licensing does not go away
Some advisory work is licensed and some is not, and which is which depends on your field and your state. Forming an LLC changes nothing about it. If a license is required to do the work, it is required whether the invoice comes from you or from a company.
The entity is the easy decision. The election is the one worth timing.
Pick your state.
Each state page covers forming the LLC there, how that state treats the S-Corp election and whether it wants its own election filed, the licensing questions that apply to advisory work, and what has to be filed each year to keep the entity current.
A clean handoff, in four steps.
The order is much the same for most consulting businesses. Form, get the number, separate the money, cover the exposure, and revisit the tax question once the profit is real rather than projected.
Form the LLC
Filed in the state where you work, under the name that will appear on invoices, contracts and the bank account. This is the record every later filing is written against.
Get the EIN
The federal number that the bank account, any payroll and any credit in the company's name will run on. It attaches to the entity, so it comes after the state filing rather than before it.
Banking and invoicing
A business account and invoicing in the company's name. Running personal and business money through one account is what people point at to argue the entity was decorative, and it is avoidable from day one.
Insure, then revisit tax
Professional liability cover for the advice itself, then track profit and plan the S-Corp election, the payroll and the annual filings that follow it once the numbers support the overhead.
Formation is a day's work. The election is a decision you revisit every year.
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The questions people ask before they file.
Is an LLC the right entity for a consultant?
It is the usual route for advisory work: limited personal exposure, pass-through taxation and very little governance overhead compared with a corporation. It also keeps the S-Corp election available as a later decision rather than a founding one. Corporations tend to make sense when outside investment or issued stock is part of the plan, which is uncommon for a practice built on billable advice.
When does the S-Corp election make sense?
Once net profit is high enough that the self-employment tax saved on the distribution portion outweighs what the election adds: payroll to run, a separate return to file, and the help most owners need for both. Below that line it is overhead for its own sake. It is a calculation rather than a rule, and the state layer moves it, which is why the state page carries that half.
What counts as a reasonable salary?
The W-2 half of an S-Corp split has to reflect the work actually performed. There is no single figure and no safe formula. What makes one defensible is the reasoning behind it: the duties, the hours and what the same role would pay someone else. Set at the lowest number that produces the largest saving, it is the first thing anyone reviewing the return will pull on.
Do I need a license to consult?
It depends entirely on the field and the state. A great deal of advisory work is unlicensed. Some of it sits inside a regulated profession, and in that case the license belongs to the person doing the work rather than to the company. Forming an LLC does not create permission the state has not granted, and it does not remove a requirement that applies to the practice.
Does the LLC protect me from a bad-advice claim?
It separates the business's obligations from your personal assets, which matters for contracts, leases and business debts. It is not a shield against your own professional negligence and it is not insurance. That is what professional liability cover is for, and for advisory work it is the more immediate of the two protections. They do different jobs, which is why they are usually held together.
What do I have to file every year?
At minimum, whatever your state requires to keep the entity on its register, which is a report on an annual or biennial cycle in many states and a tax filing in others. On top of that sits the federal return for the entity, plus payroll filings if you elected S-Corp and are running a salary. Your state page lists the state half in detail.
Keep going, in order.
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