Let’s say you are a traveling dj. You get a gig in Vegas that pays you $500 bucks. Not bad. Problem is, your travel, meals, and other miscellaneous expenses are not covered. Without setting up a legal entity, you can’t get the same tax benefits as other “business types”. If you want your music or art to be a business, its time to start treating it like a business.
A limited liability company (LLC) may be just the thing. Not only is your personal liability covered (so if you get sued and lose, you aren’t going to lose your personal assets, like your condo or your car) but you can itemize your business related expenses and get a nice little tax break at the same time.
LLC’s are easy to set up with the help of a handy dandy lawyer. In Illinois, Blagojevcih takes $500 up front and another $100 to expedite the application or “Articles of Organization”. If you don’t expedite, the state takes about 3 to 5 weeks to process your application. If you are in business for yourself, you will become a single member LLC and you will not need much more in terms of documentation. Once you are organized as an LLC you can get a Federal Tax ID Number and open up a business bank account. Any agreement you enter into from this point forward should be on behalf of the LLC, so you remain protected. Obviously, you should and will need to consult an attorney to guide you through this process.
There is a lot more to LLC’s; their advantages, disadvantages, comparisons to C or S corporations. But we can get into all of that later.