Choosing Your Freelance Writing Business Structure: Sole Proprietorships and Partnerships

Let’s get into some of the nuts and bolts of the freelance writing business, shall we? Whether you’re new to the freelance writing business or whether you’ve been doing this gig as long as I have, you may not have stopped to consider the options when it comes to the structure of your business.

The vast majority of freelance writing businesses are sole proprietorships, not because that’s the best model for their business, but because they haven’t had a need or seen the possible benefits of another structure.

Today, I’ll look at two of these business structures, and talk a little bit about each one from the perspective of a freelance writing business.

Sole Proprietorship

A sole proprietorship is sort of the default small business. A freelance writing business will usually start out as a sole proprietorship. With this business structure, you as an individual receive all of the income generated by the business, and the profits of the business go right into your own tax return. You’re liable and legally responsible for any debts the business incurs.

From a freelance writing business perspective, this isn’t a bad model. Because freelance writers typically don’t require huge investments in a storefront, inventory or equipment, the liabilities of a freelance writing business are usually smaller than other businesses. Unfortunately, if you want to spend some money on things like marketing for your writing business, your ability to raise funds is usually limited to your savings or a commercial loan.

Partnership

With a partnership, two or more people share the ownership of the business. A partnership is like a sole proprietorship, but with multiple people. That is, the individual partners receive the income of the business, and those profits hit their personal tax returns. The partners are jointly responsible but individually liable for the actions of the other partners.

A partnership can be a good thing in the freelance writing world. Most often, a freelance writer will partner with a freelance designer in order to offer more robust services to clients. Partners with complimentary skills can then work together to grow the business. On the down side, a business can dissolve when one of the partners withdraws. Make sure your freelance writing business partner is someone who can work through the kinds of difficulties that come with a business.

Come back next Tuesday, and we’ll look at the remaining options for freelance writing business structures. Better yet, just subscribe to Business Tips for Writers and you’ll get the update automatically in your feed reader or email inbox.