Note: We are not legal experts or tax preparation professionals, so always consult an accountant, tax prep professional, or attorney if you have concerns. This information is aimed at copywriters in the United States. Copywriters in other locations may find this information useful for determining what questions they need to ask and answer based on their city, country, or region.
One of the first largely unnecessary roadblocks you may face when ramping up your copywriting business is what type of business should you form?
The truth is, it’s relatively simple: for most of us, sole proprietorship is not only the easiest way to get started, but it’s all we need.
Treating your business like a business doesn’t mean incorporating to look more “official.” It means taking the actions that will move your business forward. When you’re first starting, what will move your business forward is landing clients.
Let’s briefly dig in to some of the most common business structures.
A sole proprietorship is a business that is run by one individual and isn’t incorporated. It’s the most common business structure, and one of the most common business structures for copywriters.
The government automatically considers your business a sole proprietorship if you conduct business without registering another type of business structure.
Those that know a bit about business, or even opened another type of business in the past, may be hesitant to go the sole proprietor route because of liability. But as we’ve covered before in this other post, there are virtually no instances as a copywriter where you would be liable. You deliver copy to your client who then has the responsibility to make sure it’s used in the appropriate way.
Another huge misconception from new copywriters (and, frankly, new freelancers in general) is that you can’t get an employer identification number (EIN) as a sole proprietor. That is dead wrong. You can get an EIN as a sole proprietor. This allows you to give clients your EIN for tax purposes rather than your social security number (more on EINs to come in a future Copywriter Business Bootcamp post).
You can also use a name that isn’t your legal name (more on this to come in a future Copywriter Business Bootcamp post, too).
Limited Liability Company (LLC)
Forming an LLC, like most of the advice you’ll find out on the Internet, is, at best, aimed at freelancing in general, if not at forming a business in general. Yes, an LLC makes sense for other businesses and potentially freelance careers where liability is an issue.
LLCs protect you and your assets (your house, your car, etc.) if a client were to file a lawsuit. But as we already covered there’s virtually no reason why, as a copywriter, you’d be held liable.
And, if it’s just you running your copywriting business, a single-member LLC is taxed the same way as a sole proprietor, meaning you’ll still pay self-employment tax.
Costs of forming an LLC vary from state to state, and beyond the initial paperwork and fees, many states require you to file an annual report, which also has fees associated with it.
There are several types of corporations, including the S-Corp. For those looking for more of a tax benefit, S-Corps seem attractive because like an LLC or sole proprietorship (and unlike a corporation or C-corp), profits are not taxed at corporate rates.
Recognition of S-Corps varies from state to state, though. You’ll need to register with your state and at the federal level. You also need to pay yourself a salary. Your salary should be similar to what other copywriters are making at your level for the IRS to deem it a “reasonable salary.” (As we say here, if you earn $100,000 and take a $25,000 salary, expect to raise red flags with the IRS.)
So while you may be able to save a bit on self-employment tax, it’s far, far easier to reduce your taxable income through business and personal deductions.
Going down the rabbit hole of whether you should incorporate your business is one of the major sneaky distractions for new copywriters (click here to see the others).
Go with what you need right now; you are not locked into a business structure. If you decide an LLC or another business structure will move business forward (like when you have too much work and need to hire employees), you can file the paperwork at any time.
But until then, don’t create headaches for yourself if they’re not needed. And don’t let choosing your business structure derail you from making progress on the things that will move your business forward right now, like building your portfolio and pitching.
In almost every case, your clients won’t care about your business structure. They’ll care that you deliver great copy.
Of course, as noted above, always consult legal and tax experts to find the best option for you.
Your turn! What structure did you choose for your business and why? Tell us in the comments below.
Last Updated on January 19, 2023
Phil L. says
Great advice! (But: “society security number”? ?)
Kate Sitarz says
Thanks for reading, Phil! It looks like you’re referring to a typo, but perhaps a member of our team already corrected it. Appreciate the eagle eyes!
A really nice reply to those of us that value quality of information. Thank you for being courteous