For most content creators and influencers, the focus is on creating content that will inspire and entertain their followers. But, get a big enough following and you have to start thinking about formalizing your passion project into a business.
Most small businesses start out as sole proprietorships, but at a certain point, forming an LLC can have big benefits on small businesses. As more and more companies shift their marketing spend onto content creators, including micro-influencers, it’s time to be thinking about formalizing your business and forming an LLC.
Influencer marketing spend is expected to grow to $13.8 billion in 2021. Forming an LLC could be your ticket to getting a slice of the pie.
What Is an LLC?
An LLC is a type of business and is the abbreviation for limited liability company.
The name a is a hint into one of the biggest benefits of forming an LLC: it limits your personal liability and protects you as an individual. By forming an LLC, you separate your business assets from your personal assets, which limits your personal liability for your business. When working with brands as a content creator, you might run into situations where you are held liable for something. For example, if you collaborate with a brand and run into contract, copyright or trademark issues and get sued, your personal finances, such as your bank account, your home and your car, will be safe.
An LLC gives business owners the best of both worlds. You get the simplicity and pass-through tax status of a sole proprietorship or partnership while getting the liability protection and formality of a corporation.
Let’s dig in to better understand the specific benefits of an LLC when it comes to small businesses and content creators.
4 Benefits of an LLC for Content Creators
So, you’re already emailing brands for collaboration and you’ve signed up for an influencer marketplace. The brand deals are flowing in and you’re making some extra income, what’s the benefit of an LLC?
Many small businesses operate for years as sole proprietorships. To become a sole proprietor, you essentially just start calling yourself a business. It sounds a little crazy, but it really is that simple.
But, for a small investment of time and money, you can turn your business into an LLC and receive a number of benefits to your business.
1. Reduced Liability
As mentioned earlier, the most obvious benefit of an LLC is that it creates a boundary between the personal finances and assets of the owners of the business and the business finances. Essentially, your personal assets are off-limits if you are sued and can’t be used to pay off any business debts.
While an LLC provides a lot of protection, there are some very specific instances when a court can “pierce the veil” and access the business owner’s personal finances. Once you’ve created an LLC for your business, you should do your part to keep your business and personal finances separate by having a business checking account and credit card that are used solely for business purposes.
2. Less Complexity
When you’re a small business with just one employee (that’s you!), you don’t have time to make operating a business any more difficult. That’s why an LLC is the business type of choice for small business owners. You get all the benefits without the hassle.
Filing for an LLC takes just a little time and a little paperwork. The upkeep is also minimal.
To create an LLC, you need an Employer Identification Number (EIN) and to file some paperwork with your state. There are lots of services that can help you through this process at no cost. As to upkeep, LLCs require that you file and pay your taxes with the IRS and you may have an annual reporting requirement with your state.
3. Potentially Lower Taxes
Another benefit of becoming an LLC is that you might pay less in taxes, without making it very much more complicated.
LLCs are taxed as pass-through entities. This means that the LLC itself doesn’t actually pay taxes. Instead, the business’s finances are filed on the owner’s personal tax return. As an LLC, you can choose to be taxed as either an S Corporation or C Corporation. Most LLCs choose to be taxed as an S Corp because it avoids the possibility of double taxation (yuck!) that sometimes happens to C Corps. Filing your taxes as an S Corp can lower your self-employment taxes, putting more money back in your pocket. Try using an S Corp tax calculator to see how much you'd pay as an LLC vs. S Corp at tax time.
Being a self-employed business owner does mean that your taxes get a little bit more complicated. This is true whether you are operating your business as a sole proprietorship or an LLC. As a small business and content creator, you should strongly consider hiring an accountant to help you file your taxes. An accountant can help you make sure you pay what is required, without overpaying.
4. Business Credibility
An indirect benefit of turning your business into an LLC is the credibility those three letters will lend to your business.
As an LLC, you get to tag those three letters to the end of your business name, which will appear on your website, on contracts, on invoices and on checks.
When a company is looking to partner with a content creator, they’re looking for someone who is reliable and business savvy. Having "LLC" behind your business name shows those potential partners that you’re a legitimate business that takes this seriously.
Expert tip: Don’t want LLC in your business name? That’s easy! File an extra form, called a DBA or Doing Business As, and you can use a different name for your business than what’s on your legal forms.
Do I Need an LLC as a Content Creator?
After reading through all of the benefits that an LLC can offer business owners, you might still be left wondering: But, do I need an LLC as a content creator?
And honestly, it’s up to you. An LLC is not a requirement to operate a successful business. Many sole proprietors operate successful, profitable businesses for years.
But what an LLC can give you is credibility and peace of mind. The process might seem daunting at first glance, but it really is simple. You file some papers and you get the clout of operating a “real” business.
If you’re still not sure whether an LLC is right for your business or not, you can consult with a business attorney or a tax professional to get more personalized advice on your specific situation.
How Do I Apply for an LLC as a Content Creator?
In most states, the application process for an LLC is very simple. But, it’s important to recognize that each state has a slightly different process, so it’s important to research the guidelines and steps for your state before you get started.
And, if you find you need help along the way, there are many companies that offer resources and support navigating each step of the process. They can even help you file your LLC for free.
You’ll follow the basic outline, no matter your state, to file for your LLC:
- Choose a name for your LLC.
- Designate a Registered Agent (this can be you).
- Obtain business permits (if any are needed).
- File Articles of Organization.
- Create an LLC Operating Agreement.
- Maintain your LLC.
As your business grows and makes more money, it’s natural to want to formalize your content creator business — whether that’s for you, the IRS or for other businesses that are looking to hire you as a content creator. One way to make your business more “real” is to file for an LLC. An LLC designation can also benefit you by lowering your tax burden and reducing your personal liability for your business’s debts and legal issues.