Should I Start an LLC for My Proofreading Business?

Starting a limited liability company (LLC) for your proofreading 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 proofreading business, lawsuits can arise from things like the release of a client’s confidential information following a data breach or a competing company alleging that you’ve slandered them.

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

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

Do I Need an LLC for a Proofreading 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 Proofreading Business

By starting an LLC for your proofreading 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.

Proofreading businesses will benefit from liability protection because of the risk of being sued for negligence, libel, and privacy violations.

Example 1: After your proofreading business suffered an extensive hack, the confidential information of a number of its customers was released to the public. After suffering significant financial loss as a result, a customer felt obliged to bring a lawsuit against your business for this data breach. In the litigation that follows, limited liability precludes you being held personally liable for any obligation to pay compensation imposed on your business.

Example 2: While visiting the offices of your proofreading business, a client trips on some loose floorboards and falls onto a glass table, sustaining significant injuries as a result. This led the client to sue your business for this bodily harm. In this instance, any liability to pay compensation can only be imposed insofar as the value of your business’s assets.

Example 3: After finishing work, an employee at your proofreading business reversed into a customer’s car that was parked in your company’s parking lot. Due to the extent of the damage to his car, the customer sued your business for this property damage. If the court found your business liable to pay damages to the plaintiff, your personal assets would be safe.

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 Proofreading 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 proofreading 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

Proofreading 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?

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

While a proofreading service seems like a relatively benign profession, it can still be subject to a number of risks, including client lawsuits, property damage, libel, and even employee injury.

Common Situations Business Insurance May Cover for a Proofreading Business

Example 1: Your office cleaning service accidentally spills cleaning products on a paper manuscript you need to proofread for a client, ruining the document. General liability insurance would cover the cost of replacing your client’s damaged property.

Example 2: A competitor files a lawsuit against your company, claiming you libeled her business. While you disagree with the claim, you know you need an attorney to protect your interests. General liability insurance would pay for your legal defense.

Example 3: While visiting your place of business to discuss a proofreading project, a client slips on wet tiles in the restroom, breaks an arm, and sues you for damages. General liability insurance would cover your legal defense costs and any required settlement.

Other Types of Coverage Proofreading 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 proofreading businesses should obtain.

Professional Liability Insurance

While you strive for perfection in your proofreading work, there’s always a chance one of your clients might decide you made a mistake that caused them harm. If a client sues your business for negligence, professional liability insurance would cover your legal fees and any required settlement.

Commercial Property Insurance

You made a major investment in the equipment, supplies, and real estate you use to run your proofreading 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 as well as the business materials stored there.

Workers’ Compensation Insurance

If you have any employees, most states will require you to carry workers’ compensation insurance for your 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 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 Business Insurance article for more info.

Your proofreading business can be started with very little capital; usually, about $1,000 will suffice. The only completely necessary costs are a computer and an internet connection. This is because your business can easily be run without the need to rent office space, whether that be from a coffee shop, a space in your house, or a public library.

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

Ongoing expenses can include office rent (if you have one), travel costs, and electricity.

Learn more about running a proofreading business.

Proofreaders charge clients for their services on a per-word, per-page, or per-hour basis.

Learn more about starting a proofreading business.

A proofreader corrects mistakes, such as typos and spelling errors. People who write books, magazine articles, websites, and any other written materials need proofreaders.

Profits depend on marketing and clientele.

Learn more about starting a proofreading business.