When I started submitting short stories in the 1990s, I considered writing my hobby. Then I started to get some nice little checks for those stories and moved onto to writing books. I began to recognize my writing as a business when I took over Night to Dawn magazine in 2004, and in 2008, began publishing other authors through the Night to Dawn imprint. It occurred to me though that if someone should sue the business – you never know – they could go after my personal assets. That was when I began to contemplate an LLC.
Before making the switch to a single-member LLC, I had several deep discussions with other writers who decided to incorporate. Some chose the LLC, and others went for the S and C corporations. Many writers, including myself, wear different hats—blogger, editor, publisher, and so forth. You want publishers and creditors to take your business seriously, and incorporating can make that happen. I shied away from the corporation because of the double taxation, not to mention the paperwork. The corporation gets taxed on its profits, and then I’d be taxed on my paycheck from that corporation. With the LLC, the profit and loss will be passed directly onto me. I opted for the LLC. Since my business is small. I can operate it as a sole-proprietorship.
There’s a caveat. The laws vary from state to state, and some states require that you have a partnership. Happily Pennsylvania allows forming a SMLLC (single member LLC). There is no minimum age requirement. Still, the learning curve runs long. Pennsylvania requires that you maintain a physical address in the state where the company accepts legal documents. No post office boxes on the form. I applied for my LLC through LegalZoom, but had to file the docketing statement and certificate of organization. The fee for Pennsylvania was $125. If I were a doctor, lawyer, etc, filing an LLC to run my office, I’d have to shell out about $500. A partnership LLC would have to pony up $340. LegalZoom did most of the paperwork for me.
When you name your LLC, you can’t use works like “incorporated” or “corporation” because these words imply you’re incorporated and would create confusion in the marketplace. You must include “LLC” or other format of “limited liability company” with your name. You can’t use the company name to imply that it’s a bank, insurer, or trust without permission from the proper legal authority. As it was, I had to get permission to use “Night to Dawn Magazine & Books” to make sure it didn’t bear a resemblance to another business’ name. This was not an issue, so now the name is Night to Dawn Magazine & Books, LLC.
Most states require annual reports and franchise taxes for the right to do business. Pennsylvania does not require paperwork or taxes to remain in good standing. The local county might require taxes and licenses, but Pennsylvania does not.
Since I set up the LLC, I set up a business checking account. The folks at my bank have been really helpful with this. Keep the books of Night to Dawn separated from my personal stuff. That means a personal phone versus a business phone, a business email versus my personal email. I can’t mix them up like I do my balloons. I did say the learning curve was long, right?
Have you given any thought to forming an LLC? If you have, what made you decide to form an LLC? I’d be interested in hearing about your experiences.
Funny you bring this subject up. Only last week I and friend kicked the idea around and made a short list of pros and cons. In Connecticut this is an expensive move as the state is imposing new taxes and surcharges almost daily against businesses. to cover out of control spending. But at the end of the day, the fact is, you are correct, this is a business and proper safeguards need to be in place in such a litigious society. The formation is easy it is just the upkeep that is expensive; but in the end it may still be cheaper than being on the wrong end of individual liability. Thanks.
I’m dealing with the expenses too – the $125 I mentioned is every year, and there is an extra form my accountant will have to file. That and the legal fee I spent. I did it this way to keep nice and clean and avoid being on the wrong end of litigation. Glad my post helped.
It did because I have been on the fence about it and I need to give it serious thought. Thank you.
Very Interesting. I’ve thought about doing this over the years. Thanks for sharing your experience with us, Barbara!
I was glad to do this. Thank you, Sally!