Today is July 1 and it is the first day I’m doing business as Burns the Attorney, Inc. The old saying about the cobbler’s kid going unshod? Yeah, that was me. I should have done this a while ago but, still, now is better than later.
Forming an entity is a state-specific thing. The legal hoops you need to jump through vary from state to state. For example, I incorporated because I had no other choice. In California, you can’t have a solo-member LLC if your business is the law. You can, however, have a solo-member creative business LLC. Or incorporate. Go fig.
Anyway, there are many reasons to form an entity. The most obvious ones for a solo are to protect your personal assets and for tax benefits. For the second, you should talk to a CPA. A (non-tax) lawyer can give you some general tax advice, maybe, but a CPA will know best. Talk to one before you do anything about formation.
The other one, asset protection, is where talking to me (or any good business lawyer) makes sense. See, if you don’t form an entity and your business gets sued, well, you are your business legally-speaking as well as metaphorically. That means whatever assets you have in your personal world (like your house and car and retirement accounts) are available to pay a judgment against your business. Lawyers like me know what you need to do to form the wall between your business and your personal assets.
Arguably more importantly, we know what you need to keep doing to make sure that wall stays strong. See, if you don’t “maintain the formalities” (as the law likes to say), your wall can become paper thin, making piercing the corporate veil a piece of cake. Once the veil is pierced, your personal assets are back in play. Yikes!
In the creative world, creating an entity has extra considerations: your copyrights. As a sole proprietor (i.e., not an entity) you are the author of your creative work and the copyrights are owned by you. They will last until 70 years after your death. But, if you form an entity, you become an employee of that entity and the entity becomes the legal author of your work! Suddenly, the term of the copyrights change: 95 years from the year of the work’s first publication or 120 years from the year of its creation, whichever ends first. There are also inheritance issues then. There are legal ways to hold onto your copyrights in this situation–an attorney can help you with understanding which way is best for you and then making that a legal reality.
As for me, it is a relief to have taken this step. I sleep better at night knowing that my house (that I own with my boyfriend) isn’t endangered by my business. Also, it sure doesn’t hurt to know that I’m saving some money on my taxes, too.
So, while the way I serve my clients won’t change, starting today I’ll be serving them as the President/CEO of Burns the Attorney, Inc.
That’s some fine shoes.
Well done and congrats!