What type of business should you setup for your creative services?

Thinking about going freelance? Let me be the first to say, congrats! Going freelance is a huge step toward taking your career into your own hands, but with that comes a lot of added responsibility...besides doing your creative work. Managing your cash flow, dealing with taxes, and protecting yourself from unforeseen setbacks now take a front seat to buttery smooth mograph.

If you follow any part of the motion graphics industry, you’ll often find a hotly debated topic on LLCs and incorporating. If you’re anything like me, you probably told yourself that—since you’re just starting this self-employed journey—you don’t need to deal with the hassle of setting up a business. Well, maybe it’s worth a second glance...

In this article, we'll be covering some important information:

• What is an LLC?
• Why would you incorporate?
• How do you set up an LLC?
• What about S Corp or C Corp

What is an LLC?

An LLC is an acronym for limited liability company. Hopefully that didn’t just blow your mind. LegalZoom defines an LLC as “a separate and distinct legal entity, meaning that an LLC can get a tax identification number, open a bank account and do business, all under its own name.” LLCs combine characteristics of corporations and sole proprietors (freelancers) and are generally very easy to setup.

Benefits to incorporating as an LLC:

• Fast and easy to setup
• Simple business structure
• Generally inexpensive to set up
• Established at the state level

Why should a motion designer incorporate?

Incorporating does a few things for you as a solopreneur—most notably giving your personal assets some legal protection by making you (the motion designer) and your company separate entities.

Keeping your business and personal life apart is vitally important if you ever find yourself in the unfortunate situation of a lawsuit. The party suing can only go after your LLC’s assets and not your personal assets, like your car/house/retirement accounts or kid’s college funds...you get the idea. The cynic in you may think, “I make dope videos for a living. Who wants to sue me?”

In one simple scenario, imagine that you created a piece and used a popular song as a temporary music cue. You intended on swapping it for royalty free library music, but mistakenly forgot and delivered the project to your client. The client then posts online or (worse) broadcasts it on TV. The song’s record label then sues the client who in turn sues you for damages. Ugly scenario to be sure, but entirely plausible.

This unfortunate event might bankrupt your company, but thanks to incorporating you and your family are safe.

Enough of that reality check—back to cool things. LLCs can also provide tax benefits in a variety of ways. Depending on your situation, your LLC can be taxed on your personal tax return or as an S or C Corp (more on those later). A good CPA can help you there.

Incorporating also gives you the added advantage of looking more legit than other folks. And looking too legit to quit is half the battle...

How do you set up an LLC

1. File Paperwork

Setting up an LLC is actually pretty easy – outside of dealing with the bureaucratic nightmares that are government websites. Luckily, there’s folks that help with that. ZenBusiness is a lifesaver of a website that walks you through the process and files all of the necessary paperwork to form your LLC for only the cost of the fees your state charges.

They do this for FREE, but offer expedited services for a fee. ZenBusiness’ model is they help you here in hopes that you’ll use them for some of their paid services after you’re incorporated. After the paperwork is filed, you should receive a confirmation of your incorporation within a few weeks, unless you paid to expedite the process.

2. Get an EIN

An employer identification number (EIN) is basically a social security number for your company. Many sites exist that will charge you a fee to get an EIN for you, but you can do it for free on the IRS’ website. After submitting the form, you’ll receive your EIN immediately.

3. File a DBA (maybe)

If your name is Keyframe O’Malley, but your business is Shape Layer Magic Inc., you’ll need to file a 'Doing Business As' (DBA) form with your state. This basically means a vendor can pay Keyframe O’Malley for the work that Shape Layer Magic LLC did. If on the other hand Keyframe O'Malley's business is Keyframe O'Malley LLC, then a DBA is most likely unnecessary. The process for filing a DBA varies by state, but searching for something like “Florida DBA” is a good place to start.

4. Open a Business Checking Account

In line with separating your business and personal life, you’ll need a business checking account for your LLC. Even if you already have a Business Checking Account as a sole-proprietor, you’ll need to open a new one since it ties into your EIN and DBA (if you have one). Do your homework on which bank you choose as many offer cash incentives for opening a new account.

5. Get a CPA

Set up a meeting with a CPA to discuss your new business and how it should managed through the year and treated when tax time arrives.

What About S Corp or C Corp?

If you’re setting sail down this waterway, you absolutely need to get a tax professional to captain you along.

Per Incorporate.com, on a basic level, an s corporation (s corp) is like the lite version of a c corporation (c corp). S corps offer investment opportunities, perpetual existence, and the same coveted protection of limited liability. But, unlike a c corp, s corps only have to file taxes yearly and are not subject to double taxation.  

Head spinning yet? That's why you need a pro to guide you.  As a very general rule of thumb, a conversation on corporate structures with your CPA or financial adviser might be worth the time once you near a six-figure salary.

To wrap up, think of incorporating like a bike helmet.  You might be fine cruising down the sidewalk without one, but when you level up to crushing a mountain bike trail, it's in your best interest to wear one.

Also we have to put this legal disclaimer because... law stuff.

Communication of information by, in, to or through this web site and your receipt or use of it (1) is not provided in the course of and does not create or constitute an attorney-client relationship, (2) is not intended as a solicitation, (3) is not intended to convey or constitute legal advice, and (4) is not a substitute for obtaining legal advice from a qualified attorney. You should not act upon any such information without first seeking qualified professional counsel on your specific matter. The hiring of an attorney is an important decision that should not be based solely upon online communications or advertisements.

What's next for your career?

Did all that adult talk get you thinking about your career trajectory? Do you know your path through the world of motion design? If not, then maybe it's time to Level Up.

In Level Up, you’ll explore the ever-expanding field of Motion Design, discovering where you fit in and where you’re going next. By the end of this free course, you’ll have a roadmap to help you get to the next level of your Motion Design career.

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