Should freelancers create their own LLCs? Is day trading a good way to make passive income? Here to discuss all money matters is Philip Michael, host of Bold Business. Our viewers slid into his DMs and asked questions about financial literacy, business strategy and much more. Here are excerpts from this segment of Ask Philip. For the complete responses, check out the video.
Q. People on social media are always talking about starting a business. As a freelancer, should I create an LLC?
A. Well, if you’re already an active freelancer, having an LLC is essential. If you have money coming in, you need to have an entity that can collect that money, and you need to have an accountant so you can report that money accurately … Now, I suspect you’re asking if you need an LLC to start. Actually, you don’t. Before you go through all the work of building a website, doing the logo (all the busy work that gives you the illusion of actually working, but you’re not doing anything that matters), I would say go out there and test your hypothesis, which is your business idea. See if there’s a market for it … Once you have that, and assuming you already have income from whatever it is that you do, yes, you actually absolutely should have an LLC.
Q. Is day trading a good way to make passive income?
A. Wealthy people have multiple streams of income. And I suspect you’re asking to see if day trading can be one of those sources of income you have to build a foundation. Day trading is inherently volatile. In addition, to be successful at day trading, you have to immerse yourself in it. I think it’s almost an oxymoron saying, “Oh, can I just casually day trade?” Not really; I have never heard of that working unless you’re very experienced, very successful and can do it on autopilot. But as with anything you’re great at, you can eventually become more hands-off with it. So, the short answer would be no.
Q. I want to buy my first property with an FHA loan. Are there other costs that I have to worry about, like lawyers and other third-party fees?
A. Yeah, absolutely. Now, when you’re buying a property, there’s something called closing cost: It can be what you pay your lender, whatever you pay your agent and lawyers, of course. There’s a big pie, and everybody wants a piece of the pie … But there’s a way to get around that. And even if you don’t have a way to get around it, it’s so inconsequential that it should not prevent you from actually getting a deal done.
Want to hear the ways around closing costs? Check out the full video above.
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