Since I began freelancing nearly 10 years ago, I've never separated my writing earnings from other income. I paid the self-employment taxes on those earnings. Honestly, I did not see the need to separate income from a few writing sales each year from my earnings from my full-time job.
Then, I started freelancing full time. For the last five years, as my writing business has grown - along with the income - I've contemplated forming a Limited Liability Corporation (LLC), but I haven't determined if it's worth it. Yes, I make a living from my writing abilities, but I don't view myself as a "big-name brand" so I'm not sure if I will be ahead by forming my own writing conglomeration where I can rule the publishing world...at least in my mind....and keep personal and business finances separate.
According to the Internal Revenue Service, an LLC is a type of business structure, allowed by state statute, where owners have limited personal liability for the company's debt and actions of the LLC. The LLC can include several members or it can be a sole proprietorship.
Will it add more paperwork or will it make bookkeeping and tax time easier? What costs are associated forming this type of arrangement? Do other writers use an LLC or is it an unnecessary expense?
I'm still weighing my options about the value of an LLC for a freelancer, and I've scheduled an appointment with the accountant so we can discuss the benefits and drawbacks. Then I will be able to make a sound decision...and continue my quest for publishing domination!
What do you think, writers? Should a freelance writer form an LLC?
by LuAnn Schindler. To read more of LuAnn's work, visit her website.
Should A Writer Form a Limited Liability Corporation
Wednesday, November 17, 2010
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5 comments:
I don't know much about the tax implications of essentially making yourself an LLC, but I do know there are legal benefits. The biggest one is that it keeps your assets separate from your 'LLC' assets. So if there are tools you only use for writing, you can set them up as owned by the LLC. It's a way to protect the assets of one if the other gets into financial trouble.
For instance, if an individual had to (heaven forbid) file bankruptcy, the assets of the LLC would be exempt. In a case like this, the freelance writing tools wouldn't be subject to things like liquidation. That's the biggest reason I know of to keep the two separate for an individual.
I don't find LLC necessary.
I'm curious about this, and hope you do a follow up post with what you learn/decide. I'm nowhere near writing full-time, but I've already found that it helps to be apprised of and think about some of these things long before you reach that point.
I will keep everyone updated. I'm still weighing the options. :)
Update?
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