Here's an arts / crafts business start-up question I received in a recent email:.
Question: What type of business entity should we choose to start-up a arts / crafts business?
Answer: Taking the taxation and management aspects out of the equation - the answer to this question goes back to the issue of limited liability. Corporations and S-Corporations normally have limited liability but what about LLCs or LLPs? The question of limited liability for any entity (except the sole proprietorship which has none) is dictated by state statute.
The state in which I have my LLC affords limited liability to LLC members. Each state is different. So make sure you thoroughly check out your own state statutes prior to making a decision based upon limited liability.
And limited liability not only protects you against debts incurred solely by the business but also if someone is harmed by your product or sues you for copyright violation. How about if you are sued because you failed to complete an order in a timely fashion and your buyer was damaged because they didn't have your product to sell to their customer? Or you sold a piece of jewelry to a client, it fell apart and a child choked to death on one of the components? How about if you are sued personally for a trip and fall in your house (totally unrelated to your arts / crafts business), the plaintiff wins and wants to seize your corporate shares as part of the judgment?
Check out my article on the three different types of business entities and either read your state statutes or get the advise of a competent attorney prior to making a decision based upon your unique arts / crafts business circumstances. State Statutes are available online by doing a search using a key phrase containing your state's name and the term 'state statutes'.
More information on the three different types of entities. These articles also discuss the issues of taxation and management:
