Dear Dave: My wife and I are debt-free, plus she has a business giving music lessons. We formed an LLC last year when she had several students and was making over $3,000 a month, but that all changed when our first baby arrived. Now, she has only a few students, and they bring in around $700 per month. Should we dissolve the LLC?
Dear Ben: First, congratulations on being debt-free and new parents. Happy New Year to you all!
In most states, the only upfront cost for an LLC is the money you pay for the initial set up. There may be a small fee for a business license and subsequent annual renewal, but that generally doesn’t add up to much. Then, there’s the money you pay for filing your tax return on the LLC once a year. Even if you live in a state where there are other fees to consider, as long as the cost of maintaining the LLC wasn’t killing you, I’d recommend keeping it in place. You went to the trouble of opening it, and you just might use it again someday. Even if your wife is staying home with the baby, she just might be able to take on more students again as time goes by.
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Just be reasonable and use common sense. If you spend $3,000 to stay open, and you’re making $700, you’d dissolve it, right? But as long as you don’t have fees that are making you cringe, I’d probably leave it in place.
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