If you are considering crowdfunding a comic (or anything else for that matter) you need to establish an LLC as soon as possible. Here’s why artists need an LLC.
I’m no great businessman, but I’ve learned quite a bit in the last 10 years as a self-employed artist. My most successful Kickstarter/Indiegogo projects in 2019 finally made me heed the advice of both my accountant and that one guy in my YouTube livestream chat that kept repeating “do your LLC paperwork!”
In the end, what made me take the advice is the $10k tax bill from the IRS.
Yeah, don’t do what I did, kids. I’m now a cautionary tale.
So here’s what happened: I brought in a decent amount of money for a graphic novel ($44k) and set aside some for profit, and some for fulfillment. The problem came when I crossed over that December 31st date on the calendar without finishing shipping. The IRS counted everything in my account as “income” event though I was saving it for expenses.
Being an idiot hurts.
The LLC does two important things for the artist.
First, it gives you legal protection.
What happens when that random guy sues because your work reminded him of a character he created in his Algebra notebook in 1996? The LLC protects your personal assets. If you somehow lose that legal battle, the LLC will take the hit, not you.
Second, you only pay taxes when you pay yourself.
Instead of getting a big surprise from the IRS, the money set aside for fulfilling that awesome Giant Robot Comic that I have on Indiegogo that you can back right now is safe. The LLC does not pay income tax on the money it brings in. YOU pay taxes when the LLC pays you. This becomes important as you start having shipping and production costs. You know, like a business.
Even with an accountant helping me, It cost less than $300 when it was all said and done. The state’s paperwork was only a page. And you’ll need to come up with an original name that isn’t similar to an existing LLC in your state. North Carolina has a searchable database of LLC names. I’m assuming your state probably has the same kind of thing. So there’s why artists need an LLC.
Don’t get blindsided. Put on your adult pants and get smarter at business.