Embarking on a small business venture is always a challenging endeavor, and this is no less true for those venturing into the voiceover business. The first decision to make is whether to treat voiceover as a hobby or a business. If the latter, the next step is to establish a business entity, such as an LLC (Limited Liability Company), S or C Corp, or a sole proprietorship.
A sole proprietorship is often the simplest form of business, usually owned and run by a single individual. Alternatively, an LLC can have one or more members, providing liability protection and tax benefits, albeit with a bit more planning required. Essentially, it offers freelancers a way to structure their businesses, safeguarding their interests while retaining independence.
Operating a voiceover business requires careful thought about personal liability and maintaining autonomy. A recommended strategy is to form an LLC, providing you with a protective layer against personal liability. If forming an LLC isn't a preferred option, operating as an independent contractor is possible, following IRS Publication 587 guidelines.
When is it best to form an LLC? This varies from business to business, but if you have considerable assets or want tax savings, it's an advisable step. If operating as an independent contractor, deciding on the best way to file—forming an LLC versus incorporating—becomes a key consideration.
While corporations are incorporated, LLCs are formed. Compared to incorporating your voiceover business, forming an LLC is typically easier and less expensive. Among other benefits, an LLC can protect assets against third-party claims, offer tax advantages, and enhance business credibility.
Structuring your voiceover business as an LLC isn't essential if you're operating as an independent contractor, but there are compelling reasons to consider it. An LLC provides comprehensive liability protection, equal to the protections offered by corporations. If you're just starting and lack the resources to form an LLC, a sole proprietorship could suffice. For those seeking to grow their business simply and cost-effectively, a C Corporation—offering owner control and limited liability—is a viable alternative.
Forming an LLC comes with several benefits. When filing LLC formation documents, you'll need to assign your voiceover service a unique name, which also serves branding purposes, eliminating the need for a DBA (Doing Business As). As an LLC, you'll enjoy enhanced credibility and trust, and crucially, personal liability protection.
Sole proprietors often face self-employment taxes on earnings. An LLC helps mitigate this tax burden by consolidating earnings, with the business's net income passed to the owner and taxed under individual income tax codes, not corporate ones.
Forming an LLC involves filing paperwork with your state's secretary and paying a filing fee, which can range from $40 to $500, depending on the state. This process can be self-managed or facilitated by a professional.
Asset protection is vital for freelancers. If you're unable to afford an attorney, forming an LLC can help protect assets and limit liability. It also offers a safety net. LLCs provide liability protection, credibility, branding, and privacy, with the flexibility and independence to manage client projects effectively.
The choice between operating as an LLC, sole proprietor, or another entity depends on the unique circumstances and needs of your business. However, unless your business is very low-risk, like a hobby, an LLC is often a more favorable option.
Voiceover Business by Alan Shires