Freelance Writers: Here’s Your Guide to Understanding LLCs for Your Business
Writers are engineers of the soul. Writers are passionate. Writers are skeptical. Writers are imaginative. Writers are a lot of things…but they might not always be that business savvy. Great at crafting sentences, but maybe not so much with crunching numbers and comprehending legal!
As a freelance writer, you may one day scale your workload, become pretty successful, and decide it might be time to take your passion a step further. Whether that is because you are drafting your novel, hosting online writing workshops, or receiving a large following for your magazine column…forming a limited liability company (LLC) may be a great option for you and your craft.
Creating an LLC is not just a solid business model for marketers and consultants; it can be useful for writers as well. Forming an LLC also doesn’t need to be overly complicated or time-consuming. You can form your LLC quickly and easily with the right knowledge and assistance. And lucky for you, we are here to help! Here is your guide to understanding LLCs for your business.
LLC vs. Sole Proprietorship for Freelance Writers
An LLC is a business entity type that is separate and distinct from a person. This is a fancy way of saying that legally and financially, your risk as a business owner will be limited to the amount you have invested in the LLC — your personal assets beyond that are protected.
This is different than a sole proprietorship, which many freelance writers are. In a sole proprietorship (basically, a business of one with no formal legal structure), there is no separation between the business and the individual. You as the owner are responsible for all of the debt, legal and tax liability.
Let’s use an example to illustrate. Say that a client you do some copywriting for is extremely displeased with your work and decides to sue you. If you have an LLC, your personal assets would be protected since they would be legally separate from your business assets. Because hiccups such as this aren’t uncommon in the writing business, using the structure of an LLC ensures you are protected and your personal assets are not fair game.
How to Form an LLC
Each state has different LLC rules and requirements, but there are typically seven main steps to forming an LLC, which include:
- Selecting a state and business address
- Naming your LLC
- Selecting a Registered Agent
- Deciding how to file your paperwork
- Obtaining and filing the Articles of Organization
- Creating an Operating Agreement
- Getting a federal Employer Identification Number (EIN)
Detailed information on how to go about each step can be found here.
There are other business entity types you may want to explore before deciding to form an LLC. Depending on your situation, perhaps an S Corporation or C Corporation would be your best option. Compare and contrast the various structures to ensure you are forming the best one for your business by keeping your future goals in mind.
Why Form an LLC as a Freelance Writer?
If you’re a freelance writer who thinks that the current way you’re operating as a sole proprietorship is working for you, then of course that’s fine. However, there are plenty of benefits to forming an LLC as a freelance writer that you may not be aware of.
Besides the legal protections it provides to your personal assets in case of a lawsuit, having an LLC can make it easier to receive business funding if that’s something you may need to consider down the road.
You also have the option to bring on multiple owners in an LLC. So if you have a co-author or other copywriters you regularly work with, you can form an LLC together and all be held accountable for the finances of owning and operating a business.
In addition, forming an LLC can help protect you and your business against fraud and embezzlement. These are all perks you should take into consideration, especially if your business is growing!
Need Help? Ready to Form Your LLC?
Although creating an LLC as a freelance writer can be quick and easy, that doesn’t mean you’ll understand every part of the process or have the time to do it all yourself. If you find that you need additional help, or if you would like to file your LLC in a couple hours or less, reach out to Incfile!