Should I Create an LLC If I am a Creator?

Napoleon

Feb 12, 2024 — 5 min read

As a content creator and an influencer, you focus on creating content that inspires and entertains your followers. You may consider formalizing your creation project into a business as your followers grow. Can you create a legal entity if you're a creator on Instagram, TikTok, Twitter, or any other creator platform?

You can create a legal entity to protect your assets, enhance credibility, and provide tax benefits. Although you may sell under a sole proprietorship, the ideal legal entity is an LLC (limited liability company) if you wish to expand and add members. In this guide, you will learn everything you need to know before registering an LLC.

What's an LLC?

LLC is a business type that prevents members from liability for business debt liabilities and financial losses. If there is a legal action against the company failure, the company takes the liability instead of its members. This business structure blends the flexibility of a partnership with a corporation's liability protection.

An LLC allows you to separate your personal from company assets, limiting the company's personal liabilities. For example, working with a brand as a creator, you may run into a situation, be liable for trademark issues, and get sued. In such a scenario, your personal finances and assets will remain untouched.

Why Choose an LLC Entity Structure Over an LLC?

Although most people want to work under a sole proprietorship, an LLC can benefit your company. This includes;

Reduced Liability

As noted earlier, the primary benefit of an LLC is the boundary between personal assets and finances and that of your company. If you're sued, your assets and finances will not pay your company's debts. Although an LLC protects your personal finances, the court can sometimes bend the rule and access your personal finances.

After creating an LLC, keep your business assets separate from your personal finances by using accounts and credit cards for company purposes only.

Less Complexity

When you operate your business alone, you don't need complexity. The LLC offers simplicity that benefits small businesses, offering benefits without hassle. It takes a little time and paperwork to form an LLC. Additionally, the requirements are minimal.

Lower Taxes

Another advantage of an LLC is you may pay less taxes. LLC tax passes through an entity, meaning the LLC doesn't pay tax. Instead, you file tax as a C corporation or S corporation. Most LLCs prefer an S corporation over a C Corporation to avoid double taxation. Filing your company tax as an S corporation can lower your taxes and help you put more money in your pocket.

Protect Personal Privacy

If you form an anonymous LLC, you can prevent your personal information from getting in the public record. With this, you can enjoy the features of a private LLC without the public knowing who owns the LLC.

Business Credibility

Forming an LLC adds your business credibility by adding those three letters at the end of your company name. Those three letters will also appear on your contract, website, invoices, and checks. Companies searching for a content creator need someone reliable and legitimate. Having an LLC at the end of your business shows potential hirers you're professional business savvy, and they will take you seriously.

Solidifies your Company

The rules and regulations in an LLC structure require a contractual agreement between the business members. This solidifies your company and creates flexible ownership; additionally, it provides required paperwork if the business is sold or transferred to another individual within the LLC.

Form Your Company With Foundeck Today

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The Downside of Forming an LLC for a Creator

LLC won't favour you, especially if you make a lot of money or plan to transfer business ownership. Let's check the disadvantages of an LLC if you're a creator.

Hard to get money for your content creation business
Challenging when transferring ownership
Most ideal for small or start-up business

For example, if you're making about $50 or less yearly, LLC suits you, but if you have a higher revenue, go for a corporation.

Choosing Creator LLC vs. Sole Proprietorship

When starting content creation, you always have a picture of the positive side

Becoming a globally known content creator
To gain millions of followers
Picture how successfully you will become and impact people from all corners of the earth
How big will your income grow through online courses, product lines, partnerships, content, etc

But have you ever thought about the content creator's downside scenario?

A lawsuit: although the chances of facing a lawsuit are slim, you should consider it and stay alert. You may upset your client or a partner, resulting in a lawsuit, and they have a valid case against you. What will you do?

If you're in a sole proprietorship, business and personal assets are separated. In the case of a lawsuit, this means

You're liable for your business debts and obligations, meaning your personal finances and assets. Since they are not protected, they can be seized and used to discharge your business debts. That's why you should consider LLC over sole proprietorship. Even if you spend more creating an LLC, it's better for your peace of mind. Nothing is more satisfying than knowing your personal assets and finances are protected against any claim against your business.

How to Open a Creator LLC

After weighing the benefits of an LLC in your content creation career, you may be wondering how to apply for an LLC. The application is simple, but varies from state to state, so research before you begin the process. If you need assistance, hire a tax professional or a business lawyer.

Here is the process of registering for an LLC

Choose your LLC name
Check if you have all the required business permits
File of articles of organization
Create the LLC operating agreement
Get an EIN
Maintain the LLC

How are Creators' Businesses Taxed?

If you do not include all members of your LLC, you will be taxed as a sole proprietorship. For example, the IRS will tax you based on the money you earned from the money you make from social media platforms like Instagram. States may have different taxes like sales, franchise, or local taxes. Other states have taxes for specific products like mixed beverage tax, battery sales tax, crude oil tax, etc., so ensure you inquire with your state local authorities for those taxes.

What are the Legal Requirements for a Creator Business

Like any business, you must follow federal, local, and state authority's laws and regulations. Preparing all the permits is a crucial step when starting your creator business. You may need the following depending on your state, type of business, and local government.

Seller's permit: you need this if you sell services or goods online
Home occupational permit: If you are running your content creator business from home, you need this permit
Business operational licence: this is one of the licenses that almost every content creator business should have to run their business in a state or city
Doing business As (DBA): if you're operating your business using another name rather than the names on your ID, you need a DBA
Employer Identification Number EIN: This is mandatory if your business collects payroll tax
Occupational licence: This licence is vital if you're a professional practising online, like a doctor or content creator.
Sales tax licence: if you're a creator who sells taxable services, ensure you get this licence.

Conclusion

LLC for your Creation business offers you and your business liability protection, business credibility, tax flexibility, and much growth potential. You will have the advantage of having a legitimate business that separates your personal and company assets. This protects your individual assets protected against a business lawsuit and liabilities. Have a question on how to form your company or choose a business structure for your brand? Contact us to get help with all your questions.