A limited liability company or LLC is a business structure that is attractive to authors because it is simple to form and maintain and offers a lot of flexibility. For authors, forming an LLC under which to publish their works is an excellent way to protect their personal assets, enjoy various tax benefits, and ensure privacy.
Any new business venture must be structured as one of several legal business entities:
- Sole proprietorship;
- Partnership;
- Corporation; or
- Limited Liability Company (LLC)
The business entity you choose for your writing business will dictate:
- How its ownership will be allocated;
- How you will pay your taxes; and
- Who will be liable for debts and lawsuits incurred by the business
Each state has specific requirements for forming and maintaining a business entity within that state. But, regardless of the state in which you form your business, one of the most beneficial choices of business entities for authors is the LLC.
Why Choose an LLC?
An LLC has several features that make it desirable for authors:
-
Asset protection -
An LLC creates a business entity that is independent of its
owners, creating something referred to as the
corporate veil. This protects the owner's personal assets
in the event of a lawsuit or creditor action arising out of the
owner's business activities, which for an author is his or her
works of authorship.
If you operate your writing business as a sole proprietorship or partnership and, for example, you use an image in one of your publications that wasn't properly cleared for use, or a lawsuit arises because someone objects to the content of one of your publications, you can be sued as an individual and lose your personal assets e.g. your home, your car, etc. An LLC can protect your personal assets by acting as a separate business responsible for its own debts and lawsuits. - Pass through the taxation - When an ordinary corporation makes a profit, that profit is taxed at the corporate level and then again at the personal level, when it is distributed to the LLC’s owners as dividends. An LLC pays no income tax, instead, its income flows through to its owners' personal income tax returns and is, therefore, taxed only once.
- Simplicity - Business compliance and accounting can be complicated. LLCs, when compared to other corporate structures, are easier to form and maintain, even when there is only a single owner.
LLC and Taxes
Taxes are one of the most complicated aspects of doing business and there are serious consequences for failing to pay them. LLCs offer a lot of flexibility when it comes to how they are treated for tax purposes, which you can use to your benefit.
Federal Taxes
For federal tax purposes, the IRS will ignore your LLC and tax you as an individual. In other words, your LLC's income will be reported on your personal tax return at the end of the year.
If you are a multi-owner LLC, the LLC will pay no income tax and all of its profits and losses will pass through to its owners, who will report their portion of the LLC's revenue on their individual tax returns.
Furthermore, while these are the default tax options, you can also elect to have your LLC taxed as a C-corporation or an S-corporation.
State Taxes
Since they are usually pass-through entities, LLCs do not pay state taxes. Instead, state taxes accrue to the individual owners of the LLC. That being said, there are certain kinds of taxes that an LLC may be required to pay in some states. These include:
- Unemployment insurance tax;
- Franchise tax;
- Withholding tax; and
- Sales tax
You should consult with a Wyoming business or tax professional for details about how this relates to an LLC formed or operating in Wyoming.
LLC for Privacy
LLCs are formed at the state level. To officially form an LLC you must file paperwork with the state's secretary of state.
When you file your paperwork with the state, they will ask you to list a registered agent, who will receive mail and official documents for your LLC. Your registered agent can be a member of your LLC or a hired professional service.
One of the biggest advantages of using a hired service for your registered agent is privacy. A professional service will provide your LLC with a level of privacy and anonymity by keeping your personal name and home address off of any of the LLC's contact information.
There are many reasons why you may not want your personal name and address associated with your works of authorship. Using a professional service as your registered agent is an easy way to accomplish this.
Contact an Experienced Wyoming Business Consultant
You can never completely prevent problems from occurring, but to prepare for the worst and to protect yourself and your business, forming an LLC is a good idea for authors due to its flexibility and simplicity.
An LLC offers an author the limited liability of a corporation and the pass-through tax benefits of a sole proprietorship or partnership, along with being simple to maintain. To learn more about forming and maintaining an LLC in Wyoming contact an experienced Wyoming business consultant.
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