Most artists ask themselves, “What’s the appropriate business “vehicle” through which to operate; should I be a sole proprietorship, or should I incorporate or form an LLC?” The right decision will be based around concepts of personal protection from the liabilities of the entity, as well as the tax treatment afforded. Each business form offers advantages and disadvantages to its members, so understanding the pros and cons of each is critical to making an informed decision. Mark A. Baker will guide your business formation decision toward the most favorable for operating your artistic venture. The following breakdown discusses the basic forms of business entities.
Sole Proprietorship: The profits of the business are yours, but so are all financial and legal liabilities, which means if the business incurs a debt, or commits a tort, and gets sued because of it, then you, the business owner, are personally liable and your personal assets may be seized to cover the debt. You will be deemed a Sole Proprietor by default if you don’t establish a more formal arrangement.
General Partnership : Easy to form with no formal written agreement or filing with state or local governments needed, but often requires legal action to dissolve. Partners are personally liable for the obligations of the partnership, which means you are bound by another partner’s potential negligence (for example, debts incurred, even if you didn’t know about those debts). In many cases, the Limited Liability Company accomplishes the same objectives of a General Partnership and provides liability insulation to the members. General Partnerships may not be used for a charitable or philanthropic ventures.