Managing Your Business
Should Artists Start an LLC?
Being a professional artist can be one of the most rewarding jobs on the planet. You can create art day in and day out, sell your work to interested collectors, and support yourself all on pure creative energy. But if you enjoy little luxuries like eating food and paying rent, it’s important to remember that your art business is just that — a business.
We know that you’d much rather focus all your energy on artistic pursuits, but it’s equally as important to put on your business owner hat and think strategically. Whether you’re selling prints or original art, taking commissions, or doing freelance graphic design work, you need to ensure your art pays the bills. One of the best ways to facilitate that is by registering as an LLC.
What Is an LLC?
An LLC is a limited liability company. Basically, when you form an LLC, you’re creating a legal entity separate from yourself. This can be incredibly important, even if you’re the sole person running your small business and form a single-member LLC.
One of the biggest benefits of an LLC is personal liability protection. If any legal trouble comes your way, you won’t be sued for all you’re worth in your own personal assets. Instead, your LLC will take the hit. This protects your personal assets and property in the event of any lawsuit, debt, or financial problems. It also grants you some benefits when it comes to filing taxes.
Other Business Structures for Artists to Consider
When your art business is in its startup phase, you have several other options to consider when it comes to registering your business license.
If you’re already selling your art without any kind of business registration, you’re doing so as a sole proprietor. A sole proprietorship is the simplest form of business structure for a sole business owner, but it has some drawbacks. Namely, operating as a sole proprietorship means that you’re liable should any legal trouble or financial problems come your way. This can be particularly disastrous if you’re anything less than a full-fledged millionaire with tons of expendable assets, but even then, taking that hit can be painful.
Most professional artists start an art business to avoid the corporate lifestyle, so they might be hesitant to form their own corporation. However, if you’re an art entrepreneur bringing in substantial income and employing multiple other artists, technicians, and contractors, incorporation might be the best business structure to choose. Here’s a quick rundown of what exactly we mean by C corp or S corp, and when they might be beneficial.
C corporations (or C corps) are the standard corporate business structure. They offer even more personal liability protection than a limited liability company. A C corp will generally allow you more growth potential, with unlimited members and shareholders, which may be important if you’re running a graphic design, illustration, or UX design firm that will hire many employees.
However, business filing fees for incorporation are higher than registering an LLC. Additionally, C corps can be subject to double taxation when it comes to tax season.
For tax purposes, a C corp reports and pays at the corporate tax rate. The term “double taxation” refers to the fact that a C corp must pay taxes on its profits, and then the shareholders pay dividend income taxes, taxing twice at both the corporate and individual level.
An S corporation (or S corp) is a step in between a C corp and an LLC. The S refers to a special tax status that allows for certain tax advantages. Namely, you won’t need to pay income tax at a corporate level. This means that S corps are not subject to the sort of double taxation a C corp is. Additionally, unlike a C corp, an S corp has a limit of 100 shareholders, so it’s best for smaller ventures.
Benefits of an LLC for Artists
In addition to personal asset protection, legal protection, and liability protection, registering your LLC as an artist can be beneficial because it requires fewer formalities than other business registrations, such as incorporating as an S corp or C corp. Additionally, the IRS requires more involved reporting on tax returns for a corporation than it does for an LLC.
Registering as an LLC also offers your business some legitimacy. You’d be surprised how many collectors, gallerists, and clients start to take notice once you sign emails or print business cards with your business name followed by “LLC.” It sends a message that you are serious about your art business and have gone to some lengths to conduct your business with professionalism.
Once you register, your business name is protected so that no one else can sell art under that name. This is especially important to protect your brand from unscrupulous competitors who might want to profit from your name recognition. You may also consider registering for a trademark to protect your brand.
LLC Tax Benefits for Artists
If you’re already freelancing or selling your art online, you may know something about self-employment taxes and deductions on your tax return. Basically, any expense you pay that directly goes to your business practice can be written off so that you owe less in taxes when it’s time to pay. Deductions can include things like costly art supplies, canvases, paint, digital software, studio rent, and more.
The benefit of registering as an LLC is that there is a clearer delineation between personal and business expenses, especially once you set up a separate business bank account. Additionally, your LLC tax savings will be much easier to defend should the IRS request an audit.
Do Artists Need a Registered Agent?
When filing your LLC, you’ll be asked to designate a registered agent in your state. This is an individual or entity tasked with receiving tax and legal documents and official mail on your LLC’s behalf. While you’re allowed to designate yourself as a registered agent, it can be a difficult position to navigate on your own. Many LLC owners go with a registered agent service to avoid sorting through the nitty gritty of tax and legal minutiae on their own.
Registering an LLC Made Simple
If you’re ready to take your art business to the next level and register as an LLC, we’re happy to help. LLC formation can be tricky to navigate on your own, so Swyft Filings makes it easy to file all the necessary paperwork, business license, and employer identification number, and can take care of all the legal documents to get your LLC up and running. With Swyft Filing’s help, you can focus on what matters most — creating stunning works of art.
To get started registering your new business today, head over to our LLC registration page. It takes just minutes to set up, so you can be on your way to creating your very own LLC in no time at all.