Some people may scoff at the idea that an individual could be a freelance writer for a living, but since statistics now show that there are a full 42 million independent contractors in America, many of whom are writers, not many people will be able to deny writing as a legitimate business.
Of course, many freelance writers don’t act as if they’re a legitimate business, and this usually leads them to avoid forming an LLC or incorporating. It’s important to realize, however, that forming these business structures carry numerous benefits, and this is true even for writers.
An Air of Legitimacy
One of the best reasons to form a business structure, such as an LLC or S-Corp, is the air of legitimacy that it creates. When a writer advertises themselves as simply “John Smith, Writer,” it could leave a perception of a part-time, happy go lucky, “I’ll work when and if I want to” type of show. Even if this is the truth, it’s not the message one wants to put out about their services if they wish to be respected, and taken seriously. Nevada law firm Hofland & Tomsheck advises, “…form your LLC, C-corp, S-corp, family partnership, or other business entity, and (obtain) legal counsel regarding which business type will best match your legal needs.”
Within a professional framework, a real company with a business name and structure will undoubtedly bring in bigger clients. Large companies are increasingly using freelance writers for everything from marketing scripts to social media postings, and if a person hopes to obtain work brought on by these corporations, they’ll need to look like a legitimate company.
There are also several tax benefits that a person can take if they decide to turn their freelance writing gig into an actual company. Those who do this, for instance, can usually take several write-offs and deductions. In addition, those who form an S-Corp can avoid a huge chunk of employment taxes.
Companies with the S-Corp distinction only pay employment taxes on salaries, and since a writer can simply give themselves a chosen salary and take the rest as a profit through a distribution, they can save a large amount on taxes. Those with the LLC distinction, however, will file taxes much like a sole proprietor, but they’ll still receive the numerous other benefits granted to freelancers who form business structures.
Maybe the greatest benefits of forming a corporate structure for writers is the fact that it reduces liability. Many writers may think to themselves, “What in the world could I be held liable for?” In reality, this is a good question when a writer is just starting out and simply doing subcontracting. Once they start taking on bigger jobs, however, this could quickly change.
Many freelance writers are used to online “content mills” where their writing can be rejected and pay denied if it’s not up to a client’s standards. When a writer is out on their own, though, and earning hundreds or even thousands of dollars per month per client, they can easily open themselves to liability.
If a client, for instance, thinks that services haven’t lived up to expectations, they can file a breach of contract. If an emergency comes up and the contract work cannot be completed, it may throw the client into a detrimental position. They will return to the problem source, the writer. With a corporate structure, though, a person’s personal assets will usually be safe from any civil actions.
Variety of Options
As mentioned numerous times, a writer also has the option of forming an LLC, S-Corp or other corporate structure. It’s best, however, to stick with either an S-Corp or LLC. Both of these structures will protect one’s personal assets, but those who form an S-Corp must hold shareholder meetings, adopt bylaws and numerous other “corporate” functions. Before locking in your structure, it’s always important to speak with a legal professional such as found at Hofland & Tomsheck because a writer may be able to use their LLC to file taxes as an S-Corp; this will guarantee them the benefits of both structures.
In reality, a writer provides a service to customers who then reimburse him for their labor; and this is the very definition of a company. Most writers never even consider forming a business structure, but as more and more people join the freelance marketplace, it’s likely that this trend will quickly change.
As a freelance writer Teresa Stewart knows other writers work hard, although in a less-than-traditional way, for the money that they earn. She offers suggestions for other practitioners of the craft to attract business opportunities by viewing themselves as a legitimate, valuable company.