Meeting the criteria to call yourself a business

Becoming a legal and legitimate business has many advantages for a professional cartoonist. Starting your own business requires a little work on your part but it's well worth it, and the IRS actually requires that you do if you want to get paid. You can take the following steps to ensure you meet all the criteria:

1. Form a Limited Liability Company (LLC).

Perhaps the most important thing you can do is form an LLC, or Limited Liability Company. An LLC is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. LLC owners report business profits or losses on their personal income tax returns; the LLC itself is not a separate taxable entity. This setup is a lot easier than a corporation, which is required to pay another separate set of taxes, and who wants that?

One very important facet of LLCs is that the owners are protected from personal liability for business debts and claims — a feature known as limited liability. This means that if the business owes money or faces a lawsuit, only the assets of the business itself are at risk. Creditors usually can't reach the personal assets of the LLC owners, such as a house or car.

Setting up your LLC can generally be done without a lawyer if you can read and follow instructions. In most states you start by contacting your state's corporation commission. A quicker way may be to go to your state government's Web site and download the necessary forms you need. The forms are called the Articles of Organization. The forms are usually fill-in-the-blank and easy to comprehend. You can also check out Limited Liability Companies For Dummies by Jennifer Reuting (published by Wiley).

2. Choose your company name.

One of the most important things you'll be asked for on the forms is what name you'll be doing business under, so put some thought into this beforehand. You want to make sure that the name sounds professional and is related to the type of work you'll be doing. If you're at the corporation commission's Web site, you may be able to search its database to see if there's another business using the name you've selected. Generally, if there's another LLC doing business under that name, you have to come up with a different one before you can become incorporated.

3. Publish your intention to form an LLC.

A few states impose an additional requirement: Prior to filing your Articles of Organization, you must publish your intention to form an LLC in a local newspaper. Check with your state to see if this is required.

4. Submit your final paperwork.

After you've published your Articles of Organization in your local paper (usually for three business days), you're ready to submit your paperwork for formal approval. This approval process is mostly a formality; you should become incorporated in less than 120 days.

5. After you're legally incorporated you can apply to the IRS for a Federal Tax ID number, also called an Employer Identification Number, or EIN.

To actually get an EIN number you need to go to the IRS Web site and download Form SS-4. A federal tax identification number is a number assigned solely to your business by the IRS. Your tax ID number is used to identify your business, and your clients will require it for their records so they can show the IRS that they paid you.

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