by Kevin Elliott

Wanna get sued?

Organizing your creative business as a Limited Liability Company (LLC) has many advantages, especially for saving on taxes. 

Another huge one is right in the name: “limited liability.”

Understanding Liability

Liability refers to the responsibility an individual bears if they cause damage to someone’s property or harm to another person. In those cases, you become accountable for making things right (almost always means money). We’re all familiar with the scenario where lawyers get involved, seeking compensation for car accidents, property damages, or personal injuries.

Here’s where the “limited” in Limited Liability Company becomes critical.

The Risks Without an LLC

Consider a scenario where you run a creative business, perhaps as a musician performing in venues like hotels, bars, or restaurants. You bring your fave amplifier to a gig, unaware that it has an electrical issue. Unfortunately, a fire breaks out during your performance, causing significant damage to the venue and injuring someone trying to escape the flames.

If you don’t have an LLC, you, as an individual, would be held liable for all the resulting damages. Lawyers could (would) come after your personal assets, including your house, car, bank accounts, everything. The liability becomes “unlimited” and extends to everything you own.

The Protective Power of an LLC

Think of an LLC as creating a separate legal entity, like another person, called [YOUR BUSINESS NAME]. This “person” has a distinct name and obtains an Employer Identification Number (EIN), akin to a social security number. It has its own bank accounts, files separate tax returns, and even owns its own property (your gear, supplies, maybe even your cell phone).

Here’s where the magic happens.

Suppose that fire happens during your gig and the lawyers come knocking. If the faulty amplifier belonged to your LLC, your liability would be limited to only the assets held by the company. Lawyers can seize the business’s funds and equipment, but they can’t touch your personal home, property, or bank accounts, nor those of your family members. It’s a huge contrast to the unlimited liability you would face without an LLC.

By creating an LLC, you transfer the liability to the entity itself, safeguarding your personal assets.

LLCs Aren’t as Hard as You Might Think

I know this kind of thing is scary for creatives and new business owners. It was scary for me for a very long time. But you can get over by learning how to do it. 

I wrote a whole post going through it step by step. I also did a podcast episode on it. 

You can do it. Protect yourself and your business. I love you. 

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