As a content creator, you are the backbone of the internet—where would society be without “Keyboard Cat?” With all the work you publish and share, protecting your business’s brand can be hard. That is why many content creators form LLCs to manage their assets and legitimize their business, like Try Guys forming 2nd Try LLC . Here are some benefits to consider if you’re thinking of starting an LLC for your content creation passion.
What is an LLC?
An LLC (limited liability company), is a legal entity, formed at the state level, that is generally used to own, operate and protect a business. LLCs provide the same legal and financial protections that corporations enjoy, but they are often much simpler to start, operate, and maintain.
Once formed, the LLC legally exists as a separate entity from its owner(s). This means that if the business is sued or goes belly up and files for bankruptcy, the assets of the owners (members) of the LLC can’t generally be used to settle lawsuits or debts. LLCs owners also have the flexibility to decide how they want to be taxed, and how they want the LLC to be managed.
Do I need an LLC as a content creator?
It all depends on what stage of content creation you’re in. If you’re just starting out, aren’t making much money, and only have a few subscribers, a sole proprietorship is probably your best bet. But if your YouTube channel or Instagram page starts bringing in big bucks from paid sponsorships or a bunch of loyal followers, an LLC might just be worth your while.
Why Start an LLC as a Content Creator
Starting a business is a choice. So, no matter where you are on your content creation journey, an LLC may sound good to you. Here are five benefits an LLC can offer you as a content creator.
1. Protect Your Personal Assets
Imagine that you unknowingly use a copyrighted piece of artwork to create your content. The artist or the company that created the art can sue you for damages. In this case, your LLC will take the brunt of the lawsuit, meaning that you can only be sued for the assets in your LLC, not your personal assets like your 401k, savings, car, or home. For content creators, this kind of asset protection might prove to be invaluable.
2. Lend Credibility and Professionalism to Your Brand
Forming an LLC adds credibility to your business by showing your followers, sponsors, and potential collaborators that your business is a legitimate entity. Likewise, an LLC makes it easier to open a business bank account, which keeps your personal and content creation finances separate, and establishes your LLC as a separate entity from you in the event of a lawsuit or bankruptcy.
A business bank account makes it easy to write checks to vendors, accept payment from customers, and keeps things simple come tax season. Banks also tend to look favorably on LLCs, which can make it easier to obtain a loan as your business grows.
3. Establish Binding Rules for Your Brand
When you form an LLC, you also sign and agree to follow the rules in your LLC’s operating agreement. This can be invaluable if you create content with other people. Your operating agreement will establish:
- the role of each LLC member
- who owns what
- what members are allowed to do with the content
- how profits are distributed
Your operating agreement can address nearly every situation you’ll run into. For example, if one of the members of your content creation LLC leaves to pursue other creative avenues, your operating agreement will outline what they can and can’t take with them, and will make their departure more fluid.
4. Enjoy Flexible Tax Options
By default, LLCs are taxed as pass-through entities, which means members don’t pay taxes on their business’s profits. Instead, the profits (and losses) of the company pass-through the LLC to the members, who then report their shares as personal income. Generally all the income your LLC brings in is considered self-employment income and is subject to self-employment taxes (Social Security and Medicare) of 15.3%.
You can also file paperwork with the IRS to have your LLC taxed as an S-corp. An S-corp election allows you to divide your income into two parts: a reasonable wage and a dividend. While your wages, or income, will be taxed at 15.3%, the dividend will escape self-employment taxes, saving you money. Of course as with anything tax-related, we’d recommend you ask an accountant before making any S-corp election.
Read more about LLC taxes and their flexibility.
5. Maintain Your Privacy
As a content creator, you might be comfortable being in the public eye. But just because you have a public persona doesn’t mean you’re not deserving of privacy. An LLC can help you keep information like your home address under wraps. All LLCs, by law, are required to appoint a registered agent. Your registered agent accepts any state and legal mail that comes your way.
The privacy benefit of having a registered agent is that they’ll let you list their address on all state filings and public documents, which will help keep your home address under wraps and away from grifters, viewers, scammers.
No matter what kind of business you’re into, Northwest can help start your LLC and build your business identity with a business website, email, and more today.