Should I Start an LLC for My Grant Writing Business?

Starting a limited liability company (LLC) for your grant writing 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 grant writing business, lawsuits can arise from things like a competitor claiming your negative comments about them constitute libel, and the failure of your proposal to secure funding for a client.

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

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

Do I Need an LLC for a Grant Writing 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 Grant Writing Business

By starting an LLC for your grant writing 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.

Grant writing businesses will benefit from liability protection because of the risk of professional liability as well as the general liability of running a business.

Example 1: A customer is injured while visiting a grant writing business's office due to a wet floor that was not properly marked with a caution sign. Following this, the customer decides to sue the business for damages. Limited liability protection will ensure that the owner's personal assets are protected from any compensation awarded in the lawsuit if the business is found to be liable.

Example 2: A grant writing business is hired by a school district to write a grant proposal for a new school building. Unfortunately, the proposal is not approved and the school district is not awarded the funding. Following this, the school district sues the grant writing business. Limited liability protection will help to prevent the owner's personal assets from being at risk if the business is found to be liable.

Example 3: An employee of a grant writing business is injured while working at their desk due to a faulty office chair and the employee decides to seek financial compensation through legal action. Limited liability protection will ensure that the owner's personal assets are not at risk, even if the business is found to be liable for the employee's injuries.

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 Grant Writing 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 grant writing 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

Grant writing 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 provide financial protection for a grant writing business in the event of a lawsuit resulting from mistakes made during the grant application process. It can also provide protection for the business against financial losses due to damages or injuries that may occur on the premises.

Common Situations Business Insurance May Cover for a Grant Writing Business

Example 1: During a tour of your office, a potential investor trips over a box, breaks an arm, and decides to sue your business for damages. General liability insurance would pay for your legal defense fees and any required settlement.

Example 2: As an employee moves several boxes of office supplies into your building, he accidentally knocks a customer to the ground. The customer breaks a wrist in the fall and demands your business pay for her medical expenses. General liability insurance would cover her medical bills.

Example 3: A competitor sues your business for libel. While you disagree with the claim, you know you need to hire an attorney to defend your company. General liability insurance would cover your legal fees and any required payout if you opt to settle out of court.

Other Types of Coverage Grant Writing 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 grant writing businesses should obtain:

Commercial Property Insurance

You made a major investment in the supplies, office equipment, and real estate needed to run your writing 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 stored there.

Professional Liability Insurance

While you strive to provide services that satisfy your clients, there’s always a chance someone might claim your advice or recommendations 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.

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 and professional liability insurance.

Read our Grant Writing Business Insurance article for more info.

Starting a grant writing business may require expenses such as home office equipment, rent for an office space, employee costs, professional services, promotional and marketing materials, accreditation, memberships, and licensing. These costs can range from a few hundred to a few thousand dollars. The costs for rent and professional services may vary based on location and the complexity of the business.

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

Ongoing expenses for running a grant writing business are minimal and include networking and marketing costs, maintenance of professional affiliations, utilities, and internet access.

Learn more about running a grant writing business.

Grant writing businesses make money by charging for the services that they offer. Charges can be by the hour or a flat fee per project.

Learn more about starting a grant writing business.

A grant writing business helps various organizations seek funding. Grant writers can charge from $25 an hour for beginners up to $100 an hour for experienced writers.

Learn more about starting a grant writing business.