To price your services when contracting through your LLC, you need to calculate your true business costs, factor in taxes and benefits, evaluate market rates, and choose a pricing model that reflects your value while maintaining profitability.
Unlike traditional employment, where your pay is set by your employer, pricing as an LLC contractor is entirely up to you. While this gives you flexibility and earning potential, it also means you need to understand how to calculate rates that cover your expenses, reflect your expertise, and sustain your business long term.
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1. Know Your True Cost of Doing Business
Before setting your rates, calculate the total cost of running your LLC. This includes:
- Self-employment taxes (Social Security and Medicare)
- Income taxes (federal and state)
- Health insurance premiums
- Business expenses (software, equipment, subscriptions)
- Retirement savings contributions
- Professional services (bookkeeping, legal, tax prep)
- Time off and unpaid sick days
A good rule of thumb: if you want your take-home pay to match a $75,000 salaried job, your LLC may need to earn closer to $100,000–$110,000 to cover these extra costs.
2. Research Market Rates for Your Industry
Next, benchmark your rates against what others charge in your field. Research:
- Freelance platforms (e.g., Upwork, Fiverr, Toptal)
- Industry surveys or salary reports
- Contractor job boards and listings
- LinkedIn job posts or recruiting ads for contractors
Don’t just copy someone else’s price-use this data to gauge what clients expect to pay and where your skills fall on the spectrum. If you offer a specialized service, you may be able to charge a premium.
3. Choose a Pricing Model That Fits the Work
There are several common pricing models used by LLC contractors:
- Hourly: Best for ongoing or undefined projects. Be sure to include overhead in your rate.
- Project-based: A flat fee for a defined scope of work. Great for predictable, repeatable services.
- Retainer: A monthly payment in exchange for a fixed set of deliverables or reserved hours.
- Value-based: Price is tied to the outcome or ROI your service delivers. This works well for marketing, consulting, or strategy.
You can also use hybrid models-for example, charging hourly for custom work but offering project packages for standardized services.
4. Use the “3x Rule” for Hourly Rates
If you’re transitioning from a full-time job and want to estimate an equivalent hourly rate, use the 3x rule. Take your desired annual salary, divide by 2,000 hours, and then multiply by 2.5 to 3. This accounts for taxes, business expenses, and unpaid time.
Example: If your goal is $80,000/year take-home pay:
- Base hourly = $80,000 / 2,000 = $40/hour
- Adjusted hourly = $40 × 3 = $120/hour
This rule helps ensure you’re not underpricing yourself-especially when offering specialized skills.
5. Consider the Client Type and Budget
Pricing may vary depending on who you’re working with:
- Startups: Often have limited budgets but may offer flexible terms
- Small businesses: Typically price-conscious, value long-term relationships
- Corporations: May pay higher rates but expect detailed contracts and compliance
- Former employer: If you’re contracting back to your old job, aim for a rate that reflects your shift in responsibility and added costs
Tailor your offer to the client’s size and needs-but don’t discount so heavily that it damages your long-term business health.
6. Build in Room for Profit and Growth
Your LLC is a business, not a job replacement. When setting rates, leave space for:
- Profit margin
- Business development time
- Future hires or outsourcing
- Slow periods or client loss
If you’re only charging enough to cover your basic needs, your business will struggle to grow-or survive downturns. Think long-term from the start.
7. Don’t Be Afraid to Adjust Over Time
Your first rate doesn’t have to be your final one. As your confidence, results, and portfolio grow, so should your prices. Consider raising rates:
- Once you’re consistently booked
- When you shift to higher-value services
- As inflation or expenses rise
- With new clients, starting at your higher rate
Keep in mind, underpricing often leads to burnout. Clients who value your work will pay for it.
Pricing your services through your LLC isn’t just about covering costs-it’s about building a business that’s sustainable, profitable, and aligned with your goals. Start by calculating your real needs, researching the market, and choosing a model that fits how you work. With smart pricing, you’ll avoid undercharging, earn what you’re worth, and create room for your LLC to thrive long term.
