It is a great idea to separate your business life and assets from your personal life and assets for several reasons. Among the most significant include tax purposes and more importantly lawsuits. You may consider the work that you produce lacking in any type of controversy but you may find yourself incorrect in this assumption and a lawsuit ensues that takes your business as well as anything you own personally.
There is insurance that can cover you as a writer for lawsuits. Typically named “error and omission coverage” they can be rather expensive and many writers don’t have them. If you are a city newspaper or huge writing company, you will have this type of coverage, but as a freelancer the best way is separation of your personal and business assets.
Even when working from a home office, you can separate your business and personal assets. Separating these assets can be done legally by incorporating your freelance writing business. You can form a limited liability corporation or an S-corporation.
You can form either one of these by completing forms located online or by working with the Small Business Administration in your city or community. The fees for completing the application for an S-corporation or LLC (Limited Liability Corporation) are generally under $500. This is a small price for protection of your personal assets such as your house or retirement income. There is online help for formation of these entities, such as www.legalzoom.com.
There are legal and tax distinctions between an S-corporation and an LLC. You may want to visit with an attorney or accountant to determine which will work best for you for tax purposes and what types of records you need to keep during the year.
Naming your S-corp or LLC can be difficult. Make certain you select a name that you can live with because changes cannot be made as simple as changing a password. Make it professional sounding and easy to remember. If you are considering naming the company after yourself, don’t.
Don’t name your LLC or S-corp after yourself. It’s very tempting to do so but the main point of creating the company is to separate your business and personal assets.