Should I Start an LLC for My Audiobooks Business?

Starting a limited liability company (LLC) for your audiobook business can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For an audiobook business, lawsuits can arise from things like accidentally infringing on a competitor’s intellectual property rights (e.g., trademarks, copyrighted content, etc.) while making an audio book, as well as from general employment law disputes.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your audiobook business seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

A woman listening to an audiobook while reading

Do I Need an LLC for an Audiobooks Business?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for an Audiobooks Business

By starting an LLC for your audiobooks business, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Audiobooks businesses will benefit from liability protection because of the risk of being sued for copyright infringement and libel.

Example 1: You decide to lease a second recording studio in an attempt to increase the volume of audiobooks that you can publish. After a substantial decline in sales, you realize that you do not have enough capital leftover to hire additional narrators, and decide to get a business loan. Since your business is registered as an LLC and you did not personally guarantee the loan, your personal assets will be protected if you are unable to pay the loan back in the future.

Example 2: Your LLC promises one of your narrators a bonus for working additional hours in your busiest season. When this does not happen, the narrator sues you, claiming that the company’s promise constituted a binding contract. In court, your personal assets will remain protected regardless of the outcome of the lawsuit.

Example 3: After a fall in revenue, you decide that you’re going to need to decrease your costs, and are forced to fire one of your narrators. Since all employment contracts in your LLC stipulate that a three month notice must be given, you find your LLC sued for the equivalent of three months pay. Even though your LLC may be found liable in court, you will not be.

Example 4: An author sues your business, claiming that you did not have the proper permission to record an audiobook of one of their works.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for an Audiobooks Business

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if an audiobooks business owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

For questions about tax solutions for your audiobooks business, we recommend scheduling a free tax consultation.

Credibility and Consumer Trust

Audiobooks businesses rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a professional LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Do LLCs Need Insurance?

LLCs need business insurance in order to protect their assets (e.g., recording studios, company vehicles, equipment, etc.).

All LLCs that hire employees are also legally required to purchase workers’ compensation insurance.

This is because registering an LLC protects only your personal assets. Business insurance is required to protect the businesses assets.

Common Situations Business Insurance May Cover for an Audiobooks Business

Example 1: While visiting your place of business, an author slips on the staircase leading to your office, breaks an arm, and decides to sue. General liability insurance would cover your legal costs and any required settlement.

Example 2: When a severe storm rips a hole in your office roof, rain destroys a collection of rare manuscripts an author shared with you. General liability insurance would cover the cost of replacing the customer’s damaged property.

Example 3: A competitor files a lawsuit against your company, claiming you libeled his business. While you disagree with the accusation, you need to hire a lawyer immediately. General liability insurance would cover your legal defense costs.

Other Types of Coverage Audiobooks Businesses Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all audiobooks businesses should obtain:

Commercial Property Insurance

You made a major investment in the equipment and supplies you need to record audiobooks. If you own the building in which you operate, commercial property insurance would cover the cost of repairing or replacing your business-related property in the event of a fire, theft, or natural disaster. This includes structural damage to your building as well as your business materials stored there.

Product Liability Insurance

While you strive to ensure your products bring enjoyment and education to your customers, there’s always a chance someone could claim one of your products caused them harm. If a customer sues over one of your products, product liability insurance would cover your legal defense costs.

Workers’ Compensation Insurance

If you have any employees, most states will require you to carry workers’ compensation insurance for both part-time and full-time workers. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover, but also any disability or death benefits stemming from a work-related accident.

Commercial Umbrella Insurance

While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance.

Read our Business Insurance article for more info.

In order to start an audiobook business, you will need to lease or purchase a recording studio.

You will also need to purchase recording and producing equipment, such as a computer, editing software, and a microphone.

If you hire a third-party narrator, you will also need to factor in their pay, which will depend on both: the length of the audiobook, and the experience of the narrator.

Visit our How to Start an Audiobooks Business guide to learn more about the costs of starting and maintaining this business.

Ongoing costs primarily involve narrating and producing books, along with insurance and marketing.

Learn more about running an audiobooks business.

Audiobooks businesses earn money for each book sold, either as a flat fee, a royalty, or a combination of both.

Learn more about starting an audiobooks business.

Audiobooks businesses record and sell audiobooks for consumers. These may be their own works, works that have been licensed to them by the author, or works in the public domain.

An audiobooks business’s profits depend on how many books it has, how many copies of each it sells, and the royalties or fees collected on each sale.

Learn more about starting an audiobooks business.