4 Reasons Why Artists Should Form LLCs
This post is guest authored by Victoria Gonzales, a rising third-year law student at Texas A&M School of Law. Victoria is one of our summer legal interns here at Maddrey PLLC, and we are happy to present this article. As always, I have reviewed this post for its legal and factual conclusions – Tom Maddrey
According to the Creative Career Center, visual artists are more than three times as likely than the general U.S. workforce to be entrepreneurs.
This means that working as a self-employed artist means much more than just creating your art. If you are selling your art and looking to be taken seriously in the art world, it is probably a good idea to look into forming an LLC. Generally, an LLC is a Limited Liability Company and is a good way to ensure you are doing business legally and protecting yourself from liability.
The following is a list of reasons why visual artists should look into forming a business if they are looking to make money selling art.
1. Without forming a business entity, you could be subject to personal liability
When you form an LLC, your personal assets are separate from your business assets. This means that the LLC is legally separate and is therefore responsible for its own debts and obligations. AKA the bank won’t be coming after your personal assets like your house, car, or bank accounts to collect your business debts if you are doing business under an LLC rather than your personal name. (As long as you are keeping your business properly separate from your personal stuff generally).
Imagine a case where you are sued over a contract dispute… and you lose. If you are working as an LLC, you can use company money for lawyers and legal fees but even better is that the winner cannot try to take your personal assets, only the assets that you have as a business. This is one of the most important functions of an LLC — to shield you from liability.
2. If you don’t you’re missing out on some tax benefits
LLC owners don’t have to file complex corporate tax returns. One of the nice things about owning a small business, and an LLC specifically, is that owners only have to report their share of profit and loss on their individual tax return.
Additionally, you are not double taxed when you own an LLC. The business doesn’t pay taxes, just you as the owner of the LLC. But if your business is more complex, an LLC can also be taxed like the largest corporation. The flexibility is the best part.
3. LLCs can be formed with single members
Interestingly, you don’t have to have a giant board room full of members in order to form an LLC. The word “company” in regard to LLCs can mean just you, a working artist.
If you do want to add members or have a group that you work with, forming an LLC can be a great way to formalize relationships, copyright ownership and other issues involved with working with a group of people.
4. Doing business as an LLC sends a message that you are a professional
When investors, shareholders, executives, and agents see that you have formed an LLC to do business under, it tells them that you are handling yourself as a professional business. It further tells people that you have a knowledgeable team behind you (including a lawyer and an accountant) that you are actively seeking advice from for business issues. (For more on forming your team, see this blog post). This could translate to better deals, more opportunities and possibly a lower likelihood you get taken advantage of in the long run.
For a more in-depth explanation of business entities please see this blog post.
About the Author
Thomas Maddrey is the founder and managing partner of Maddrey PLLC. Prior to attending law school, Tom was a commercial photographer, entrepreneur, and gallery owner. His work in both the arts and as a business owner has given him a unique perspective on the needs of owners and creatives, as well as an understanding of the obstacles they face.
Learn more about Thomas Maddrey HERE.