Why Freelance Writers Should Form an LLC

Last Updated on September 17, 2020 by Michael Brockbank

Is an LLC something that you should have as a freelance writer? That depends on how much effort you plan on putting into building a business. In this article, we’ll take a look at why you should consider having one.

Becoming a freelance writer is not always about exercising your creativity. There’s a legal side to it that you need to get acquainted with, especially if you want to turn your passion into a professional career.

More specifically, to become a successful solo entrepreneur, one of the things you need to consider is the legal structure of your business. So in this article, we will guide you through what LLCs are, why you should form one, and how to begin.

What is an LLC?

A limited liability company, or an LLC, is one of the four types of business structures in the US. It is a cross between the three others — sole proprietorship, partnership, and corporation — that has its own set of income, tax, and liability implications.

LLCs can choose not to pay federal taxes and instead list any profits and losses on the personal tax returns of the owner. Moreover, much like corporations, LLCs are granted limited liability, a feature that has popularized this relatively new business structure in the last decade.

How Will an LLC Benefit Me as a Writer?

Most freelancers are by default sole proprietors, as they own and operate their own business. But if they share it with a co-author, for instance, then the entity becomes a partnership.

In most cases, those structures are enough to support the business side of freelance writing. However, one of the main features of an LLC is the limited liability that corporations enjoy.

What it does is separate the LLC from its members (you and other owners). Thus, all of the assets, debts, and other liabilities of an LLC are its own and cannot be taken on by the members.

The biggest benefit that comes from limited liability is protection. Let’s say you’re a freelancer who fails to follow through on a contract. You can get sued for negligence by the client regardless of the reasons for your inability to meet the terms of the agreement.

Copyright infringement is another risk that writers fear. And if you work in the media, a small factual error can get you in trouble for libel and defamation.

Although these cases don’t actually happen very often for freelancers, an LLC can give you a layer of protection that a sole proprietorship and partnership cannot. You won’t have to settle out of pocket, which can land you in deep debt or even bankruptcy.

How Do I Form an LLC?

Each state has its own LLC laws and fees, but generally, you can form an LLC by following these five steps:

  1. Name your LLC
  2. Choose an agent registered in the state you want to form your LLC.
  3. File the paperwork with the state.
  4. Create an operating agreement that outlines the rules of ownership and operation.
  5. Apply for an Employer Identification Number (EIN) with the IRC for LLCs with more than one member, and then review the tax requirements.

The Bottom Line

Forming an LLC is not the most logical step for every freelance writer. But if you are planning to grow your business, then it can be a good idea to set it up.

Freelancers who take on big projects will benefit from the added protection that LLCs enjoy. It also adds more credibility to your name and may increase your chances of getting hired for writing projects.

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Michael Brockbank

Michael has been a freelance writer since January of 2012. He has completed more than 8,000 jobs for a variety of clients ranging from animals to travel. Currently, he is the Content Marketing Team Lead of GreenGeeks Web Hosting.

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