Should I Start an LLC for My Ghostwriting Business?

Starting a limited liability company (LLC) for your ghostwriting 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 a ghostwriting business, lawsuits can arise from things like plagiarizing work for clients, compromising a client’s personal details after a hack, and taking a competitor’s logo for yourself.

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

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

Do I Need an LLC for a Ghostwriting Business?

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

You should start 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 a Ghostwriting Business

By starting an LLC for your ghostwriting 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.

Ghostwriting businesses will benefit from liability protection because of the risk of copyright infringement, breach of contract, and defamation.

Example 1: A ghostwriting business is hired to write a speech for a politician, but the speech contains controversial statements, and the politician's career is negatively affected as a result. Following this, the politician sues the business for damages. Limited liability protection will ensure that only the business’s assets will be used to cover any compensation awarded in the lawsuit if found liable.

Example 2: A ghostwriting business is hired to write a screenplay for a film production company, but the screenplay is found to be plagiarized, and the company is sued by the original writer. The film production company, in turn, sues the ghostwriting business for damages. If found liable, limited liability protection will ensure that the owner’s personal assets are not affected by the lawsuit.

Example 3: A celebrity hires a ghostwriting business to write their memoir and grants them access to their personal data for research. However, the business is hacked, and the celebrity's personal data is compromised. As a result, the celebrity sues the business for damages. If the business is set up as an LLC, the owner's personal assets will not be at risk if the business is found liable.

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 a Ghostwriting 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 a ghostwriting 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.

Credibility and Consumer Trust

Ghostwriting 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 dependable 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?

All businesses need insurance to protect their business assets — even LLCs. This is because limited liability protection from being an LLC protects your personal assets, not your business assets.

Insurance can benefit a ghostwriting business by providing protection against liability claims related to the content produced for clients. It can also cover the business for any damages or injuries that may occur on the premises.

Common Situations Business Insurance May Cover for a Ghostwriting Business

Example 1: While waiting in your lobby for a consultation, a customer reaches for a book on a high shelf, accidentally pulls the shelf down onto herself, and decides to sue your company for damages. General liability insurance would pay for your legal defense and any required settlement.

Example 2: You author a blog to attract new clients and help other ghostwriters break into the business. After reading one of your blog posts, a competitor accuses you of libeling her business. While you disagree with the accusation, you want to secure legal representation. General liability insurance would cover your legal fees and any required settlement.

Example 3: A local competitor threatens to sue, claiming your new logo is too similar to his own. General liability insurance would pay for your legal fees and any required settlement in the event of a lawsuit.

Other Types of Coverage Ghostwriting 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 ghostwriting businesses should obtain:

Professional Liability Insurance

While you strive to create content that satisfies your clients, there’s always a chance someone might claim your work or advice caused them harm. If a client sues your business, claiming you made a mistake or failed to perform, professional liability insurance would cover your legal fees and any required settlement.

Commercial Property Insurance

You made a major investment in the equipment, office supplies, and real estate necessary to establish your business. In the event of a fire, theft, or natural disaster, commercial property insurance would cover the cost of repairing or replacing your business-related property. This includes structural damage to your building and the business materials you store there.

Workers’ Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. 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 workplace 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 Ghostwriter Business Insurance article for more info.

Starting a ghostwriting business requires minimal expenses, such as marketing, a website and domain name, a computer and internet connection, and possibly membership in a professional association. Website design can range from a few hundred to several thousand dollars, hosting a website usually costs under $100 per year, and buying a domain name is under $10 per year.

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

The ongoing expenses of running a ghostwriting business include professional group membership, utilities, marketing, and general office expenses. If you expand your business, you will also have payroll expenses.

Learn more about running a ghostwriting business.

Ghostwriters make money by charging a fee for writing projects that they work on for a client. Some boost their profits by offering ghostwriting classes for a fee.

Learn more about starting a ghostwriting business.

Ghostwriting businesses provide writing services for clients who cannot write for themselves. Influential individuals and businesses are the primary target audience.

Ghostwriting businesses can be very profitable since the operating costs are minimal.

Learn more about starting a ghostwriting business.