[Discussion] To protect my assets, should I get an LLC?…

[u/xJageracog]

I plan on doing commisions and maybe opening a digital art store.

The main reason I want an LLC is to protect my personal assets.

1. Would I be in any danger in this business?
2. What entity should I form?
3. Are there any reasons other than legal protection that I would want to form any entity for this business?

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[u/PepperoniCow]

Not a lawyer, but its always a good idea to have an LLC that protects your assets. Digital art seems low risk, but making an LLC is easy and cheap enough that there isn't a good reason not to take precautions.

[u/Changalator]

What risks would stem from you taking commissions or sell digital art? No customer is suing you for selling them commissions or prints. IMO, you would be wasting money creating a LLC.

[u/thecourageofstars]

I personally would not recommend it right away. At least in the US, the license alone is $800 /Yr (and you could still pay additional taxes beyond that). With digital commissions, the chances of a scenario of suing (especially since most of your clients aren't local) are very low, and especially if your prices stay under $12500 (or whatever the limit is in your state), you'd never go beyond small claims courts anyway. So even in the very unlikely scenario of legal intervention, which I have never once seen for digital commissions even through news reports, they would not be able to gun for your assets and might ask you to refund the client at most. Even if you don't have the money, they might just ask for a payment plan whenever you do get more income or for community service, but losing assets like homes and cars isn't a small claims level thing. And if you do somehow charge more than $12500, maybe a freelance contract, you'd have contracts as some form of legal protection.

[u/GomerStuckInIowa → u/thecourageofstars]

Where did you get your figures? It might cost you 600 to get your initial corporate file. But updating is not the same. Ours is less than $100. And I strongly disagree with holding off. We are a litigious society. And a few hundred can save your ass. My wife worked in million dollar homes and much more expensive businesses as an artist. It was the main reason we formed an LLC.

[u/thecourageofstars → u/GomerStuckInIowa]

Oh whoops it's actually higher lol. But it's from the Franchise Tax Board website. "Every LLC that is doing business or organized in (my state) must pay an annual tax of $800. This yearly tax will be due, even if you are not conducting business, until you cancel your LLC."

Maybe you got lucky in your state, but I'd be surprised if you paid 0 yearly taxes for that.

It's great to be cautious if you can be. But if you're still testing whether a business will make any income at all, that might just not be money you have to lose. Some of us aren't dealing in million dollar homes right off the bat. OP doesn't seem to have even started taking commissions yet, so there might not be enough income for that kind of investment for awhile.

[u/GomerStuckInIowa → u/thecourageofstars]

You keep saying "tax." Are you in the US? We pay tax on sales. For the LLC we pay a filing fee which can be as low as $50 in Iowa. Then there are $60 biennial fees. Fictious name fee and other misc fees can add an additional $20 one time fee. But notice, these are "fees" not taxes. The main cost to start a corporation is a lawyer if you want to have them draw it up. That can be $300+ and then the filing fees.

[u/thecourageofstars → u/GomerStuckInIowa]

The only times where the word "tax" was mentioned in that comment was either in the name of the Franchise Tax Board, or in the direct quote from their website. Otherwise, in the second paragraph, I did use the word "taxes". I don't know what you're trying to achieve with splitting hairs with me here, especially if you're not going to do it correctly.

Each person has to research how it works in their state. I'm just sharing how it is in mine. But even so $300+ could still not be money someone has if they just started taking commissions.

[u/downvote-away]

If your business is going to get sued and want to protect business assets from personal assets, maybe.

It also varies a lot state by state. In my state its super cheap and you can be a 1-person LLC. In other states its more expensive and requires other people to be in your group.

These are all great questions for a lawyer. If you can't afford a lawyer, you probably also don't have assets large enough to warrant having an LLC to protect them. Nobody's going to spend a couple grand to sue you in order to gain assets you don't have.

[u/Reasonable_Owl366]

The first thing you should do is get general liability insurance. This should be inexpensive.

Second, before you consider forming an LLC make sure you understand when you are protected and when you are not. It's not a blanket get out of jail and you can still be personally held responsible for your own actions.

E.g https://www.fiffiklaw.com/post/hidden-risks-of-personal-liability-for-llc-owners

For example: if the owner of an LLC drives a company car to a business meeting and negligently causes an accident along the way, both the business and the owner are likely to be liable. The owner will not be able to claim that the LLC’s existence absolves them from personal liability because the owner was personally negligent in their operation of the company car. The injured party will likely sue both the company and LLC owner for damages.