What are the costs to start and maintain an illustration business?

You likely won’t need a studio or employees for your illustration business at first. This means that your overhead will be rather low. However, since a great deal of illustration work today is done digitally, you’ll need to invest in technology. Startup costs include: Computer, digital camera, and scanner: $2,000-plus Software (like the Adobe Creative Cloud): $1,000 or less Art supplies: $500 or less Visit our How to Start an Illustration Business guide to learn more about the costs of starting and maintaining this business.

Should I Start an LLC for My Illustration Business?

Starting a limited liability company (LLC) for your illustration 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 an illustration business, lawsuits can arise from things like clients claiming the illustrations your business provided were not as agreed upon in the contract or an employee reproducing copyrighted illustrations as their own.

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

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

A person illustrating a woman in a red dress

Do I Need an LLC for an Illustration 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 an Illustration Business

By starting an LLC for your illustration 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.

Illustration businesses will benefit from liability protection because of the risk of being sued for personal injuries, copyright infringement, libel, and other things.

Example 1: You take out a loan to expand your illustration business’s operations, but end up falling on hard times and are unable to pay it back in a timely manner. Since you didn’t personally guarantee the loan as the owner, the limited liability from being an LLC would protect your personal assets so they can not be taken into consideration by creditors.

Example 2: A fan wins a competition set up by your business, allowing them to tour your studio. While on the tour they trip over some furniture and fracture their wrist. They ask for you to pay for the medical expenses. Business assets could be used for this, but personal assets would not be involved since they are protected by your limited liability as an LLC.

Example 3: A pipe bursts in your studio causing significant water damage that spreads to a nearby business. The owner demands you pay for the damage. Since your business is an LLC, they will not receive any of your personal assets for the payment as limited liability protects them.

Example 4: You receive notice that one of your completed projects is a close match to another artist’s work, and they are suing you for copyright infringement.

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 an Illustration 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 an illustration 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

Illustration 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 limited liability protection from being an LLC protects your personal assets, not your business assets.

You may find yourself in court over copyright with your illustrations and having insurance can help you both protect your assets there but also cover any required legal fees.

Common Situations Business Insurance May Cover for an Illustration Business

Example 1: At a meeting, you spill coffee on a client’s expensive equipment. The client has asked your business to cover the cost of replacing the item, along with the cost of lost business that occurred while their systems were down. Your general liability policy should cover those expenses and your legal representation costs.

Example 2: You have applied to take part in an art convention. The convention requires evidence of liability insurance. General liability insurance should help fulfill this obligation.

Example 3: To expand your business, you have applied for a loan to purchase updated technology and software. The bank requires a $1 million liability policy as part of the terms of their loan. A general liability policy will cover these terms.

Other Types of Coverage Illustration 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 illustration businesses should obtain.

Commercial Property Insurance

Commercial property insurance protects your investments. This will cover the cost to replace, rebuild, or repair owned business property damaged in a named loss. Because this policy has specific exclusions, business owners who are leasing should review the terms of their lease and work with an insurance professional to identify any other beneficial endorsements.

You can purchase commercial property insurance as part of a business owner’s policy (BOP).

Workers’ Compensation Insurance

Workers' compensation insurance Workers' is a required coverage for every business with employees. If a worker injures themselves conducting business-related activities, the policy would pay a portion of their wages while they are out of work. It will also cover medical bills stemming from the incident. For extensive injuries resulting in lawsuits, a workers' compensation policy also ensures the business owner adequate defense in court.

Workers' compensation is often purchased as a standalone policy.

Business Interruption Insurance

If your business shuts down due to a covered loss, the financial impact could be devastating. Business interruption insurance provides loss of income and fixed expenses during that time. Some carriers also offer extra expense coverage, which would help you set up at a temporary location while you are getting the business back up and running.

Also known as business income insurance, this insurance can come as part of a BOP package.

Data Breach Insurance

If you rely on technology for your business, you will want to consider purchasing data breach insurance. Also known as cyberattack insurance, this policy provides coverage for a liability loss due to a cyberattack, a coverage excluded on a general liability 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 Business Insurance article for more info.

You likely won’t need a studio or employees for your illustration business at first. This means that your overhead will be rather low. However, since a great deal of illustration work today is done digitally, you’ll need to invest in technology. Startup costs include:

Computer, digital camera, and scanner: $2,000-plus
Software (like the Adobe Creative Cloud): $1,000 or less
Art supplies: $500 or less

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

Your largest expense will be any equipment needed to create your illustrations as well as labor costs if you have multiple employees.

Learn more about running an illustration business.

Illustration businesses make money by creating and then selling illustrations to clients. Oftentimes, illustrators will consult with clients to determine how best to serve their needs prior to beginning a new project.

Learn more about starting an illustration business.

Many businesses have a need for illustrations, including ad agencies, publishers, stock image services, and web content providers. Illustrators fill this need, often either as employees of these other businesses or as contractors.

In addition, some illustrators sell their products directly to the public to boost profits. Illustrators can offer a wide variety of products or specialize in a particular niche.

Profits primarily depend on clientele and sales volume.

Learn more about starting an illustration business.