3 Ass-Covering Moves Every Freelance Writer Needs to Make

Carol Tice

3 things freelance writers need to do to protect their business By Dawn Witzke

Do you dream of filing for bankruptcy? Or of having your bank accounts frozen and then drained of every cent?

Maybe you’d like to live in a cardboard condo under a bridge somewhere?


If you’re not taking action to protect yourself and your freelance writing business, those scenarios are exactly what could await you if you get sued and lose.

I know, you don’t want to hear it. I understand. Writing should be all rainbows and sunshine. However, freelance writing is a business. And like any business, it has risks.

There are crazy people out there who are just looking to cause trouble, and an unprotected writer is an easy mark.

So before you run across one of the many sue-happy crazy people, take these three steps to cover your…um… assets.

Step 1: Avoid a lawsuit

Sounds easy enough, doesn’t it?

It can be if you follow a few general practices. There is still that chance some nut will sue you, but their chances of winning will be greatly reduced.

  • Always work with a contract: Contracts are simply verbal or written agreements that detail the obligations of each party. A contract does not need to be a formal document drawn up by an attorney. It can be a handwritten note or an email. Having a written document is protection against misunderstandings about the project, deadlines and payment.
  • Communicate, communicate, communicate: You can derail potential issues in advance by keeping an open line of communication with clients. Mistakes or miscommunications can be corrected before they become a problem. If a client turns out to be a nut after you’ve already accepted the assignment, put all communications in writing. Those emails or letters will provide support if you land in court.
  • Be ethical: This shouldn’t need saying, but some people try to take short cuts in this area. Don’t lie to clients and don’t try to cheat them. Don’t make stuff up or rely on a quick Google search when you’re writing an article — find an expert and quote them. Be upfront and honest when you make a mistake. It is far better to try and renegotiate the terms of a contract than it is to breach the contract, then try to smooth it over after the fact.

Step 2: Limit your liability

The most secure way to protect yourself is to put a legal barrier between your personal assets and your business assets by creating an LLC or corporation.This barrier protects your personal assets from creditors in the case of a lawsuit or business failure.

Work with your accountant or lawyer to determine which entity will work best for your situation.

Remember, for the legal protections to work as intended, you must fulfill the obligations under your state’s laws for whichever entity you set up.

  1. Sole proprietorship: The sole proprietorship is the most common business entity used by freelancers. It is easy to set up and all income is reported on the owner’s individual tax return. The downside is that it offers no liability protection at all. As a sole proprietor your personal assets, including your house, your car and the priceless heirloom you inherited from grandma are at risk if you are sued. It doesn’t stop with just your assets, either. If you’re married, your spouse’s assets and income are in jeopardy as well. Avoiding lawsuits and covering yourself with insurance, however, can minimize the financial risks of operating as a sole proprietor.
  2. LLC: A limited liability company is a non-corporate entity that has some of the advantages of a corporation, including creating a shield between your personal assets and any business lawsuit. It also offers flow-through tax benefits (you only pay tax once on business income, on your personal tax return). Single member LLCs are simple to set up and don’t require a separate tax return for the business. However, the member has to pay self-employment taxes like with a sole proprietorship.
  3. Corporation: A corporation is a legally separate entity from the shareholders with the same liability protection as an LLC. However, setting up a corporation is more complicated, and there are strict rules of governance for this business form.

Step 3: CYA with insurance

A few dollars spent now on insurance can save you a lot of time, money and vodka if you get sued because you made a mistake or you couldn’t fulfill your contract. Insurance takes away some of the financial risks of doing business.

There are three types of insurance that every freelance writer needs: liability, property and medical.

  1. Liability: Liability insurance covers you against legal action related to your work. If you make a mistake that causes damage to your client, the insurance company, rather than you, foots the bill. Having this insurance can mean the difference between keeping your business open and filling for bankruptcy protection.
  2. Property: You may be thinking that you don’t need property insurance for your business because you work out of your home and already have homeowners insurance. In some cases, homeowners insurance won’t cover business assets that are stolen or damaged. Check with your insurance provider to find out if you need an additional rider to protect your computer and other equipment used in your business.
  3. Medical: You might be wondering, “What does medical insurance have to do with my business?” Research shows that people without medical insurance wait longer to go the doctor when ill. An illness could put you out of commission for days or weeks or permanently. Illness results in lost productivity, which is money out of your pocket. It can also set you up for a breach of contract suit. If you’re in the U.S. and have low income, check your state insurance pool — you may qualify for subsidized coverage.

I know — it’s not as sexy as landing the next big client. But a few prudent business moves can lay the foundation for a more secure, successful freelance writing business for years to come.

Are you protected  from business mistakes? Tell us your situation in the comments.

Dawn Witzke is a legal and business writer based in Iowa.


  1. Keri

    Great tips, Dawn. It’s good you mention liability insurance. A lot of freelancers mistakenly believe forming an LLC will protect all their assets, but that’s not always true. Jennifer Mattern wrote a great article about the issue recently called “Freelancers and LLCs: Not as Much Protection as You Think” at http://allindiewriters.com/freelancers-llcs-much-protection-think/

    • Dawn Witzke

      Thanks Keri. Exactly, it’s not enough to just protect your personal assets, you have to consider your business assets as well. Liability insurance can mean the difference between continuing to write if you make a mistake or having to find a job.

    • Sylvia

      Hallelujah! I’ve been trying to get the word out for years…an LLC does NOT automatically protect your personal assets! So many entrepreneurs jump on that bandwagon under the erroneous belief that it will magically protect them. The minute you sign a personal guarantee (and most business owners do so unwittingly during the every day course of running their business) that protection is rendered null.

      Speak with an attorney before going through the expense and hassle of setting up an LLC.

  2. John Soares

    Really good advice Dawn. I’m still a sole proprietor, but I’ve been considering the LLC.

    And I hear you about health insurance. I’ve had a high-deductible plan for many years, primarily through Blue Cross. However, I’ll soon be switching to different plan and provider under the Affordable Care Act (Obamacare).

    • Dawn Witzke

      Great to hear you’re getting some benefit from the ACA. (I’m holding out until they get all the kinks worked out.)

  3. Diane

    Good article, but the LLC and corporate protections depend on where you live. In Florida, a one-person LLC is treated as a sole proprietorship so personal assets are not protected. Liability insurance is the only protection.

    I recommend paying a lawyer to draft a contract template that a writer can adjust accordingly. Also, I recommend blanket refusal to use a client’s contract since it is designed for his benefit, such as being under the auspices of laws in his jurisdiction. This negates any protections the writer might have under his or her own laws.

    • Dawn Witzke

      You are right in that it does depend on the state you live in as to the specific protections of each type of entity. Always a good idea to talk with a lawyer to determine the best one.

  4. peachfront

    Seems like a scare story TBH. I would like to see an example, with actual names, of a case where a judge ruled that a writer’s community property house, car, and heirlooms were awarded to some client in a lawsuit over a breach of contract. What are you going to write that’s worth hundreds of thousands of dollars (your house) to a client? If you’re worried about some nut suing you for everything you have, make sure you have adequate auto liability coverage, since that’s where the action is. That would be true whether you were a writer or not. Much of this seems to be selling unnecessary fear to new writers, who are quite unlikely to have any assets to protect in the first place.

    • Dawn Witzke

      Not trying to scare anyone. There are risks in every business, writing is no exception. Best to go into it being fully aware of that fact and have to tools to CYA if you chose to.

    • Carol Tice

      Elaine, not trying to scare anyone — trying to acquaint you with the realities of exposure writers face to legal action. There are huge, multi-million dollar slander/libel/defamation of character lawsuits that happen all the time. The publication AND the writer are routinely named.

      For instance, this one in which defendant George Zimmerman is suing NBC for its coverage of his trial: http://www.newsmax.com/Headline/NBC-defamation-black-tape/2013/07/15/id/515061

      At one point, a prominent writing-advice blogger I know was sued for five figures for supposedly lifting a few job listings from another site. So plagiarism can also get you into this trouble.

      You can also go to jail for throwing around unsubstantiated allegations, as we saw here: http://www.nytimes.com/2014/01/12/us/bloggers-incarceration-raises-first-amendment-questions.html?_r=0 Of course, nothing protects you here except sticking to facts you can prove.

      The thing to know as a freelancer is you don’t have the publications’ lawyers backing you up, as you would as a staffer. You’re on your own. And the cost of defending it could easily wipe you out, even if you’re innocent. Unless you have taken steps to insure and protect yourself from this kind of exposure.

      People sue for big, big dollars for defamation, like this (ultimately unsuccessful) $60 million case: http://www.reuters.com/article/2013/09/30/us-adelson-libel-idUSBRE98T0ZZ20130930 Meanwhile, I wouldn’t have wanted to be that organization’s copywriter, especially if they weren’t on staff.

      • Dawn Witzke

        Exactly Carol, the suits are out there. Most end in settlement before it ever makes it to a lawsuit. Unfortunately, it’s usually not the judgment that ends up hurting you either. It’s the attorney fees and expenses incurred to defend yourself. Those are expenses you’ll have regardless of whether or not you win. A few bucks for liability insurance can save you that headache.

      • Dawn Witzke

        Exactly Carol, the suits are out there. Most end in settlement before it ever makes it to a lawsuit. Unfortunately, it’s usually not the judgment that ends up hurting you either. It’s the attorney fees and expenses incurred to defend yourself. Those are expenses you’ll have regardless of whether or not you win. A few bucks for liability insurance can save you that headache.

  5. To

    How do freelancers ensure their clients mitigate damages?

    The law generally requires the plaintiff to mitigate damages, so how do freelancers do this?

    • Carol Tice

      Not sure what you mean, Tom. In general, what I’ve seen is clients looking to YOU to mitigate THEIR damages — with indemnification clauses that put YOU on the hook legally for what you’ve written, rather than them.

      This is what my book publishers did — they were off the hook if I misstated or mischaracterizezd anything, it was all on me. That’s when I became an LLC and made sure my liability insurance was in place!

      To work it in reverse, you’d want a contract clause assigning the client liability for any misinformation, plagiarism, misstated facts in what you write. But they’re not going to do that, generally — that’s on you. You were writing it and they weren’t standing over your shoulder to see how you fact-checked, so they’re not going to cover you liability-wise. That’s why these legal protections and insurance are so important.

      We’ll be talking a bunch about this sort of thing in the Freelance Business Bootcamp coming up in March!

  6. Madeleine Kolb

    This is such an important and complex topic that it’s impossible to cover every possible problem in a single post. However, two more matters to consider are:

    1. Besides good medical insurance, I’d urge taking preventive measures, such as getting an annual flu vaccine. Your insurance may be reasonably priced–but if you get the flu or another disease–you could be unable to work for a week or more. Many pharmacies (both stand-alone or within big-box stores) offer free vaccinations with no appointment needed and a very short wait.

    2. Consider making arrangements to receive any business supplies, contracts, or other items at a Post Office Box rather than at home. Also use a mail drop service to send and receive business-related mail and packages. The idea is to avoid packages delivered by FedEx being stolen from your porch or from your mail-box or having a delivery person tripping while delivering a package to you.

    • Carol Tice

      I think it’s smarter to just have insurance, than have to be traipsing down to a PO box all the time…big timewaster. Also, you’d be surprised how companies get wind of a home-based business because you register it with the state, then find your address, and start sending you things anyway.

      If you order supplies for your home office from Staples, are you going to have them delivered to your PO box? I don’t think so…and then you’re back to the home delivery exposure problem.

    • Dawn Witzke

      Madeleine – Good point about staying healthy.

      I think the post office idea is good if you live in an area where you have issues with such things. However, if you don’t, I wouldn’t worry about it. With everything going electronic, including contracts and payment, the added expense might not be worth it.

  7. Karen Cioffi

    Great advice. I use contracts, but haven’t gone so far as to set up an LLC or corporation. This has got me thinking.

    • Dawn Witzke

      Setting up an LLC is fairly painless. If you want to find out more about what it takes to set up an LLC in your state, hop on over to the SBA.gov website. They link to local services that can answer questions and help walk you through your options. This will save you the attorney fees if you’re not sure how you want to proceed.

  8. Terri

    Each time I speak to my accountant, he keeps telling me I need to switch to an LLC. I guess it’s time I listen or at least get insurance. I’ve actually meet a handful of freelancers who have said the contract for one of the publishers they work for require freelancers to have insurance before they will work with them. I wonder if more publishers will catch on to this.

    • Carol Tice

      Government contracts often require it, Terri, and large corporations. And you should have it anyway!

      • kate

        What is the approximate yearly cost of liability insurance for a freelance writer?

        • Carol Tice

          It depends on whether it’s an add-on to existing home insurance, how much coverage you buy, and other factors.

          I have a business owner’s policy (BOP), which is a basic coverage policy, for $500 a year.

    • Dawn Witzke

      Be brave…do both.

  9. Katherine James

    Over here, (in the UK), the best option is to set up a limited company.

    It seems a daunting task though. It all sounds very official (I have taken the sole proprietorship route for now).

  10. Susan

    I know that many homeowner’s policies will cover libel. Are there any that are known to provide increased levels of coverage?

    I am not a writer. I am a patient activist.

    I received horrific medical care at a particular medical facility from a particular doctor, and though a particular subspecialty service. I found the physician had falsified (“spun”) the facts of my case, making it seem I was not sick at all, and even fabricated an entire conversation. For one of the visits I have a tape recording made with the doctor’s permission. It would seem counterintuitive to think that a physician would deliberately fabricate the record in order NOT to treat a patient, but in fact, this is what an entire medical society is being told to do by a group of physician who bully and threaten other doctor, but these bullies are involved in Lyme disease vaccine fraud.

    The hospital, instead of investigating the complaint as is required under Joint Commission rules, sent a bullying letter from an attorney stating what I allege is libelous (impossible for anyone to have known that given the complaint was not investigated), threatening me with libel, and immediately cutting off my medical care, throwing me repeatedly into medical withdrawal (yesterday was my fifth visit to the ER in withdrawal, whereas I have been prescribed the medication for a decade with no problems). The story if very ugly, and if it goes viral — which is what is my hope — it would cause serious embarrassment to the facility, as it should.

    The attorney has even riled up the campus police to follow me everywhere I go. I have taken photos of the police harassment. All of this I would like to post. None of it exaggerated. Sticking to the facts. Even posting my original medical records online so that people can make their own judgement as to what has occurred.

    The disease in question is a huge national issue, but is not receiving appropriate press coverage.

    I did read your cautionary note, and want to protect myself. Some of my property is in a trust. Some of it is not. My understanding of the protections of a trust is merely for adjudication of an estate, not for protection against a libel suit.

    Comments, please?

    • Carol Tice

      Susan, I’m not a lawyer, but I have written about business insurance — and your homeowners’ insurance is never going to cover you for libelous statements you might make in a book you publish. You’ll need a business owners’ policy or an add-on to your existing insurance.

      Better tip — document your facts and don’t libel anyone.


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