The subject of incorporation is one I’m familiar with. I first incorporated back in 1999 when my brother and I were starting online businesses right and left. I needed a cushion between myself and my assets. Without incorporating you and your business are one in the same. When your business gets sued, you get sued.
Incorporate as an LLC (Limited Liability Company) and you’ll put a layer of protection between yourself and your business. In effect you’re creating an entirely different tax entity. Now you have separate taxes to pay for your business and for you as an individual.
This is a good thing for a number of reasons. One, I’ve just mentioned – you have more protection in the case of litigation against your company – no longer can a court of law take your personal assets like bank account, car, boat, houses, etc. At least not very easily. There are exceptions. Here are some good points and exceptions about forming an LLC in Florida.
Other advantages to LLC formation:
- Profit and loss flow through to the individual tax returns of the owners of the company.
- Flexible management and organization of the business. Not as strict as other business entities.
- Limited Liability Companies don’t have the same ownership restrictions as some other corporate entity types.
Disadvantage of LLC’s:
- LLC’s often have a limited life (not to exceed 30 years in many states) Some states require at least 2 members to form an LLC, and LLC’s are not corporations and therefore do not have stock — and the benefits of stock ownership and sales.
There’s a whole couple hundred reasons you should incorporate when it comes to taxes. There are so many things you can deduct as a writer from your income before you get taxed on it.
And, get this. Say you’re writing a book on spec for someone. The company or individual pays your company, “Mike Fook, LLC.” $22,000 which you promptly put into your business checking account. You promptly write a check for $22,000 to pay your backrent for the office where you write. Guess what? You save a fortune on taxes because you didn’t pay yourself a salary out of the $22K, you paid a business expense.
If you hadn’t incorporated and deposited the $22K in your personal checking, how much of that do you think you’d pay in taxes? At least $7,000 – right?
Now, I leave it to you – should you incorporate as a writer?
What do you think?
Here is some good information on LLC incorporation in Florida at a good friend’s site – he’s helped over 10,000 people incorporate their businesses in Florida over the past decade. You need NOT live in Florida to incorporate in Florida and reap the benefits of this low tax state. Inc. in Florida – you won’t be disappointed.