There are many aspects of being a comics creator that have very little to do with making comics. Taking care of your taxes might be the least pleasant aspect of your business, but there are ways to make the process a little less painful and a little more profitable. Your comic and your business can benefit from creating a corporate structure. The type of company that I normally recommend to my clients is a limited liability company or LLC. As tax time approaches, I’d like to offer a few reasons why an LLC might be right for you.
What is a limited liability company?
Before we get into specifics about LLCs, it makes sense to start at the beginning. A company is a legal entity that can be created by filing certain documents with the state government. There are several types of corporate forms (I’ll talk about the others a little later) but an LLC is a type of company that is attractive to many small businesses including comics.
What’s so great about having an LLC?
There are four main benefits to creating a company to publish your book, including:
- Limited legal exposure: The first benefit of an LLC can be found in the name of the company. If you runs into legal or financial trouble without any corporate form, then whoever is trying to get money from you can go after your house, your car, your bank account and other assets you own to collect what you owe them. If you create an LLC and do all your business through that company, then your liability is limited to the amount of money or assets owned by the company. From a legal standpoint, you are a separate person. This is a gross oversimplification of liability law, but think of an LLC as a shield that can protect you from legal bullets and bombs if you use it the right way.
- Deductible Business Expenses: Making comics costs money. Printing, conventions, lawyers all have to be paid for your business to run. One of the benefits of creating an LLC is the ability to deduct the payments you make on behalf of the business (losses) from your taxable income. This creates the situation where some or all of the costs of running your business can be offset. The result can be more money for you to invest in your business. Of course not every expense is deductible and abusing deductions can lead to an audit, but the benefits of the system outweigh the concerns for most creators who start an LLC
- Setup and Maintenance Is Less Complicated: Unlike other business entities, filing an LLC is relatively painless. Once your lawyer creates the operating agreement, files the proper documents with the secretary of state and you publicise the LLC according to state rules, you can get an EIN number from the IRS and you’re good to go. Creating an LLC can take less than a week in most circumstances.
- Can Be a Single Person Company: Unlike other business entities, an LLC can be just one person. You can have multiple members of your LLC and you can add or remove members according to the terms of your operating agreement, but if you’re an independent artist who wants to own and control every aspect of your business, you can forge ahead on your own.
Keep in mind, creating an LLC can have a major impact on your personal and business income. Everyone’s financial situation is different and unusual or complex issues should be discussed with an accountant. Once you decide creating an LLC is right for you, I offer free consultations to help you discuss your options. It’s too late for an LLC to help you with your 2016 taxes, but forming a limited liability company now can make next year’s tax season a little better for you.
PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT firstname.lastname@example.org FOR A FREE CONSULTATION.