Establishing an LLC for Your Copywriting Business: A Comprehensive Guide

In the last few years, the gig economy has rapidly transformed, allowing people to break out from full-time employment or earn second incomes. Moreover, the increasing popularity of flexibility amongst today’s workforce, especially after the pandemic, has amplified its viability. That’s why many working professionals are leaving behind their 9-5 jobs in favor of freelancing.

In fact, most businesses now prefer a remote workforce, especially in the marketing department, to cut costs and downsize. They’re becoming increasingly dependent on freelancers to support their marketing initiatives, such as copywriting. 

Copywriting has become an essential part of any business because other departments need a copywriter to craft a compelling message for the product, the campaign, and the marketing materials. That’s why every business—no matter the size or type—needs a copywriter.

However, many of them don’t have the budget to hire an agency or a full-time employee, which is why they will absolutely need a freelance copywriter who specializes in building authentic consumer connections and boosting sales.

So, if you’re planning to start your own freelance copywriting business, there’s no time like now.

To help you get started, we’ve created this guide that covers everything you need to know about establishing a copywriting business in no time.

Understanding LLCs: Basics for Copywriters

Understanding LLCs Basics for Copywriters

There’s a huge demand for freelance copywriters, but before you can start landing clients, you’ve got to make your freelance writing business official. This will help you get more work and ensure clients are clamoring for your services.

So, you need to take actions that will move your business forward, and the next step is expanding your business by establishing it as a Limited Liability Company (LLC).

However, many business owners have a dilemma: Is setting up an LLC really necessary? 

Other common questions are whether it is the right move for a copywriter or if I should choose another type of business structure that would be more beneficial.

While there’s no one-size-fits-all answer here, an LLC—or limited liability company—can provide certain benefits for copywriters that are not available in other options. So, let’s delve into the details of LLC incorporation for freelance writers so you can decide if it’s the right move for you.

What is an LLC?

An LLC, or Limited Liability Company, combines elements of both corporations and partnerships/sole proprietorships. It’s a popular choice for many small businesses since the owners or members are not personally responsible for any liabilities or debts the business incurs. That’s why forming an LLC is best suited for freelancing in general, where liability is an issue.

It’ll protect you and your assets, such as your house, car, etc., in case of any legal disputes or other financial problems. This unique setup offers the best of both worlds, combining the pass-through tax model found in partnerships and sole proprietorships with the asset protection of individual assets by the C corporation. 

Unlike a corporation, the LCC is not a separate entity, so all profits and losses get passed directly to the members, who then report them on their tax returns. This pass-through taxation simplifies tax filings and potentially reduces the overall tax burden for members.

However, members are not responsible for paying debts if the business fails. Instead, the creditors can only go after the business assets or an established fixed sum, typically equal to the member’s investment in the organization.

In hindsight, an LLC provides a robust framework for entrepreneurs and small business owners. It offers an adaptable structure that can help protect your assets, provide tax advantages, and create a professional image of your business in the market. That’s why forming an LLC is a good idea if you plan to grow your copywriting business beyond freelance work.

Advantages of Forming an LLC for Copywriters

The thought of setting up your own business is truly exciting. However, selecting the appropriate business structure is also the most crucial decision since it’ll have far-reaching repercussions on your entrepreneurial journey. So before making this decision, you’ll have to consider various factors like personal liability, regulations, tax treatment, etc.

That’s why setting up a Limited Liability Company (LLC) is the simplest, most efficient, and fastest way to establish your copywriting business. Apart from tax flexibility and limited liability, an LLC allows first-time business owners to build their desired company with minimum hardships. 

To understand what makes LLC the most suitable option,  let’s learn more about its advantages and other fundamental factors to help you decide if it is right for you and your copywriting business.

Keep Limited Liability

Every business involves a certain level of risk, even copywriting business. One of the primary benefits of forming an LLC is its personal liability protection. In other business structures, such as sole proprietorships and partnerships, there’s no protection for personal finances in the event of a lawsuit or fraud.

An LLC can keep you safe by protecting your personal assets from any business debts or legal liabilities incurred by the LLC. This protection can offer you peace of mind and a sense of security, especially in an industry where client disagreements are pretty standard.

Avail Tax Benefits

One of the most significant advantages of an LLC is being a “pass-through” tax entity. In pass-through taxation, the LLC does not pay taxes on its income as its profits, losses, and other tax items flow through to the members. So, you can report your earnings and losses on your income tax returns, thus eliminating double taxation, simplifying the tax process, and lowering overall taxes.

Furthermore, the share of the tax items established via the operating agreement does not need to match the ownership interests. So, you don’t have to allocate profits, losses, and other tax items in the same proportions.

Build Business Credibility

Many clients, such as established corporations or businesses you often deal with, view LLCs as more credible, professional, and trustworthy. They prefer to work with vendors or contractors who operate as legal entities separate from their owners.

Apart from being a legitimate, professional entity in the eyes of potential clients, you also get to set your business apart from competitors operating as sole proprietorships or partnerships.

It’ll instill confidence in your clients that you are a serious, established business entity and lead to more opportunities for work and potentially higher-paying clients.

Flexible Management

Unlike a sole proprietorship or partnership, LLCs offer more flexibility in management and structure. This will allow continuity and perpetuity for your copywriting business in case of the departure of an owner or member.

Your business can continue operating seamlessly even if one of the members leaves, as they can transfer their ownership or add new members without disrupting primary functions. You can decide how the management structure of your LLC operates and tailor it to suit your business’s needs and preferences.

Step-by-Step Guide to Forming an LLC for Your Copywriting Business

Step-by-Step Guide to Forming an LLC for Your Copywriting Business

Forming an LLC requires minimal paperwork, fewer complexities, and lower costs. It also offers operational ease and fewer compliance issues, reducing unnecessary hassles and helping you save a lot of time and effort. You won’t need a board of directors, annual meetings, or strict record-keeping. 

You’ll need to file the “Articles of Organization,” providing basic information like business name, address, and members with a minimal filing fee. To get you started, we’ll walk you through the step-by-step process of setting up an LLC for your copywriting business, from choosing a name to filing the necessary paperwork. Let’s dive in and get one step closer to turning your dream of owning a successful copywriting business into reality!

Choosing a Business Name

The first order of business is coming up with a unique name for a great first impression on your potential clients. It can also impact your branding, credibility, and marketing efforts, so be sure to avoid anything that may mislead customers. Choosing a business name for your LLC requires careful consideration and research. 

It should accurately reflect your brand and services while also being memorable and legally compliant.

For example, if you specialize in copywriting services, consider incorporating words like “copy” or “creative” into your business name. While it’s tempting to choose a trendy or catchy name, avoid anything too specific that may limit future growth opportunities or become outdated quickly. 

Once you have come up with some potential names for your LLC, check their availability before making a final decision. This includes checking if the domain name is available for a website since the majority of your consumers are searching online for services.

Therefore, it’s important to consider search engine optimization (SEO) when choosing a business, such as adding relevant keywords to your website to improve your business’s visibility in search results.

Filing the Articles of Organization

Filling out Articles of Organization officially establishes your company as a separate entity from yourself and sets out the basic structure of your business. It typically includes essential information such as the name and address of your business, its purpose, and the names and addresses of all members or owners.

You must also specify whether you or other members will manage the LLC or appoint a designated manager. Once you have prepared all the necessary information, you can start preparing the Articles of Organization form provided by your state’s Secretary of State office. 

This form usually requires basic business information and may include additional questions depending on local regulations. After completing the form, you can submit it through mail or online with the appropriate fee attached. If you’re an international founder, you can still form an LLC in any US state as per your preference.

After approval, you will receive confirmation and a certified copy of your Articles of Organization. It’ll serve as proof of your LLC’s existence and should be kept in a safe place for future reference.

You’ll also need it to obtain an EIN (Employer Identification Number) to open US business bank accounts, which is something doola can help with.

Appointing a Registered Agent

Next, you’ll need to appoint a registered agent for your LLC who will act as the main point of contact between your LLC and the state government. They’ll receive legal documents and official correspondence on behalf of your business, such as annual reports and tax notices. In most US states, having a registered agent is mandatory for all LLCs to ensure that there’s always someone available during regular business hours. It helps prevent delays or missed deadlines that could result in penalties or even dissolution of your LLC.

When appointing a registered agent, you can either nominate yourself or hire a professional registered agent service if you are not a resident of the state where you’ve formed the LLC. An experienced registered agent can handle legal documents efficiently and ensure timely delivery. It ensures that all legal and tax documents are received and handled promptly, allowing you to focus on growing your business without worrying about missing any important deadlines. 

Tax Implications and Benefits

LLCs are popular amongst freelancers and small business owners as they offer flexible tax implications and benefits.

One of the most significant tax implications of having an LLC is that the IRS (Internal Revenue Service) will consider your business a “disregarded entity” that has not elected to be taxed as a separate entity for federal tax purposes.

If you’re a single owner, you won’t pay taxes at the corporate level; instead, you will pass all profits through to your individual tax return to avoid double taxes. If your business has multiple members, each owner will pay income taxes on their portion of the profits. Moreover, forming an LLC may make you eligible for specific state-level tax incentives and benefits.

Tax Benefits for Copywriters with an LLC

  • The government taxes single-member LLCs as sole proprietorships and multi-member LLCs as partnerships. However, both LLC types can elect S Corporation status with the IRS by filing Form 2553. This election allows you to receive some salary from your business while also receiving distributions from profits without paying self-employment taxes on those distributions.
  • Operating as an LLC allows you to deduct certain expenses from your taxable income. These deductions include office supplies, internet and phone bills, marketing expenses, professional development courses, and more. Any cost associated with maintaining your online portfolio site, such as business software or programs, hosting costs, domain name costs, etc., is also deductible. You can opt for a deduction or depreciation for expensive items like computers or furniture for your home office.
  • Since you are a sole proprietor or an LLC with just one employee, you can match your 401(K) contributions. So, as a freelancer, you can contribute up to $22,500 for the 2023 tax year for retirement savings under IRA or 401(K) Deductions.

Operating Agreement: Structuring Your Copywriting LLC

An operating agreement is essential because it serves as a blueprint for the internal workings of your copywriting LLC. It outlines the business structure for decision-making processes, ownership interests, and company governance. This document establishes the framework of your business’s decision-making process, profit distribution, and taxation.

The document includes initial contributions from the owner’s or members’ capital contributions, distribution provisions, tax allocation, and transfer of ownership interests in buy-sell provisions. 

By establishing these guidelines upfront in an operating agreement, you prepare a roadmap for managing cash flow, reinvesting profits, and planning for the future financial health of the business. You can consult a lawyer or opt for doola services to establish an LLC to ensure all necessary provisions are included and tailored to your specific needs as a copywriting LLC.

Maintaining Your LLC: Annual Requirements and Best Practices

Maintaining Your LLC Annual Requirements and Best Practices

Once you have formed your LLC, you must stay updated on state laws or regulations, including annual fees, tax rates, or filing requirements. While annual requirements vary by state, every LLC must file an annual report and pay an annual franchise tax. The Annual Franchise Tax is a fee paid by LLCs for doing business in a particular state, which depends on the state, total revenue, or number of members within the company.

Keeping Your LLC Compliant

The Annual Report is a document that updates the state on any changes made to your business throughout the year in ownership, management, or address. Some states may also require LLCs to report their financial information in this report. You can file it online or through mail on your LLC registration anniversary date. Failure to file this report can result in penalties or even dissolution of your company.

The Annual Franchise Tax is a fee paid by LLCs for doing business in a particular state. The amount of tax varies depending on the state and sometimes even factors such as revenue or number of members within the company.

In addition to these mandatory annual requirements, you should maintain accurate records of all financial transactions related to your business, such as invoices, receipts, bank statements, etc. It’ll help you with tax preparation and provide proof of legitimate business operations in case of legal disputes.

Best Practices for Managing Your LLC

While an LLC business structure has several benefits, it also comes with significant responsibilities. Here are some best practices that will help you stay organized and compliant while also setting you up for success in the long run.

1. Open a US Business Bank Account: Open a separate bank account to add legitimacy to your company and easily track revenue, expenses, and profits.

2. Keep Accurate Records: Maintain accurate records of all financial transactions related to your LLC. Organize all relevant documents such as contracts, invoices, and receipts for purchases made on behalf of the company, as well as income and expenses.

3. Consider Hiring an Accountant: An accountant who works with small businesses can assist with tax planning strategies to ensure you are taking advantage of any available deductions or credits.

4 . Stay Up-to-Date on Taxes: Understand your tax obligations depending on the state where you’ve registered your LLC to ensure you meet all requirements.

5. Establish a Bookkeeping System: Set up accounting software or a simple spreadsheet system to keep track of your LLC’s finances, expenses, and budget.

The Pros and Cons of an LLC for Copywriters

The Pros and Cons of an LLC for Copywriters

An LLC has many benefits, such as limited liability, flexibility in taxation, asset protection, and ease of formation and maintenance. While there are many benefits in forming an LLC, there are some downsides that you should keep in mind:

Formation and Maintenance Cost: LLC formation requires a filing fee ranging from $50 to $500, depending on the state. You may also need to pay annual fees to maintain your company’s status as an LLC.

Challenge in Raising Capital: Most investors are deterred by LLCs’ tax-exempt status, as investments lead to unrelated taxable income.

Set Up Your LLC in Less Than 5 Minutes

Forming an LLC to establish your copywriting business in the US is a perfect stepping stone to your success. However, navigating your way in a lot of red tape will require tedious research and endless paperwork. That’s where doola business and LLC formation services can help.

Get started with doola’s fast business formation services to form an LLC in all 50 states. We’ll also help you apply for an EIN and open a business bank account so you can easily embark on your entrepreneurial journey and unlock new growth opportunities.

If you need more information or expert guidance, you can also book a free consultation with one of our doola experts, and we’ll take it from there.

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