For all the talk about how the art world is an industry and how artists should think of themselves as being in business, it can be surprising when creatives exhibit actual corporate behavior. The ultimate example of this might be when artists—perhaps the paragons of sole proprietorship—establish their practices as limited liability companies, or LLCs, which a growing number have done as a means of obtaining bank loans, securing insurance for themselves and/or artworks and protecting their personal assets from liability and copyright infringement claims. Realitically speaking, artists like to dream big—about the big sale, the big break or the big museum retrospective—but achieving more success can mean shouldering more risk and there’s a lot that can go wrong. Perhaps someone slips and gets hurt while visiting the artist’s studio or a sculpture tips over at an art fair and damages another artwork. Or maybe you’re Jeff Koons and you’ve plagiarized another postcard, photograph or advertisement. We live in a litigious society, and a single adverse judicial ruling can cost an artist everything they own.

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With an eye on protecting themselves from one mishap or another, more and more artists have set up business entities. In 2014, Brooklyn sculptor Sharon Louden became Sharon Louden LLC, which means that if you sue Sharon Louden, the artist, you can only go after the assets held by the corporation in which Louden is the sole shareholder. Her belongings—her home and its contents, retirement account, bank account and whatever else she has—are off limits.

Sharon “had a large museum project and realized that we should protect our personal assets by using an LLC,” Vinson Valega, her husband and project manager, told Observer. “We had always known that we should be doing our large projects under the protection of an LLC, but for some reason only got around to it in October of 2014.” Today, all of Louden’s contracts are written under the LLC.

It’s an idea that a growing number of lawyers are recommending to clients in the arts. “First and foremost, artists look to form corporate entities to shield their personal assets from legal judgments and creditors,” said lawyer Robert Powers, a partner in the Virginia-based firm McClanahan Powers, which represents several visual and performing artists.

Some of Powers’ clients have been sued for breach of contract—the claim being they didn’t do something they promised to do—and for nonpayment and copyright infringement. “The legal entity limits their exposure” to whatever the corporation owns and controls.

There are several types of corporate entities, including partnerships and S Corporations, which tend to have more than one shareholder, but most artists operating as one-man shops tend to set up limited liability companies, according to Powers, where the LLC is the employer and is the artist the employee. When a sale or commission is made, the money is paid directly to........

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