Does a Social Media Influencer Need an LLC?
Mr. Beast launches viral giveaways. Khaby Lame pokes fun at life hacks. Charli D'Amelio danced her way into TikTok fame. All had different paths to social media stardom, but one thing is constant: they make a lot of money from brand sponsors. In 2023, influencer marketing generated 21.1 billion dollars, doubling since 2019.
It is a lucrative field, and starting your own social media influencing business is easy without many start-up costs. However, social media influencers who want to get ahead know they must run their enterprise as a small business. The first step is to organize as a legal business entity, such as a corporation or limited liability company (“LLC").
LLC vs. Corporation?
There are similar advantages to both business entities, primarily protecting your personal assets. However, when comparing corporations to LLCs, an LLC is simple to set up and maintain and avoids double taxation.
6 Benefits of an LLC for Social Media Influencers
Protects Your Personal Assets
The main benefit of an LLC is that it provides the business owner personal liability protection, meaning any business losses or liabilities stay in the LLC. Any lawsuits of the business do not affect their personal assets. As an influencer, you may face claims of defamation or non-compliance with Federal Trade Commission (“FTC") regulations, or someone may sue you for injuries they receive from a product you promote. An LLC insulates your personal assets from any lawsuits.
Provides a Flexible Tax Structure
When you first start your business, you may do it as a sole proprietor. When you have income, you declare it as personal income. An LLC is a pass-through entity for tax purposes, meaning you can still declare it on your individual income tax return, avoiding paying double taxes on your business income and your personal income.
Helpful With Tax Benefits and Deductions
Organizing yourself as an LLC helps establish yourself as a business in the eyes of the IRS. When tax time comes, you can take tax deductions for business expenses relating to your social media marketing. You may want to discuss what you can or can't write off with a CPA or tax professional.
Attractive To Corporate Sponsors and Communicates Legitimacy
Having a legal entity for your business lets sponsors know you are a legitimate business and take your business seriously. And sponsors may prefer to contract with your LLC instead of you for proof that you are an independent contractor and not their employee. Corporate sponsors prefer independent contractors over individuals, so they are not liable for employment taxes and benefits. One test of independent contractor status is if they are a legal business entity.
Protects Your Brand
When you register your business name as an LLC, no one else in the state can use it. If you have a unique logo or creative content such as photos, videos, or blogs, that is your intellectual property. You can protect your intellectual property by registering copyrights and trademarks, proving ownership of your content creation. You can license your intellectual property to other influencers, companies, or brand sponsors as an LLC.
Ability To Join the Screen Actors Guild SAG-AFTRA
The Screen Actors Guild now recognizes social media influencers and allows them to join their union. You may take advantage of their health and pension plans as a member. However, you must have an LLC or corporation to become a member of the SAG-AFTRA.
4 Steps to Forming an LLC
It is relatively easy to set up an LLC for your business. You need to know what you will name it, who will represent it, and who will run it. Here are the following steps to set up an LLC:
Name Your Business
You can choose your business name, but it must end in LLC, limited liability company, or some derivative. Check your state's guidelines. First, contact the Secretary of State's office to see if your name is available.
Get a Registered Agent
Your LLC requires a registered agent, a person, or a business that acts as the representative for your company to the Secretary of State. Typically, you can serve as your own registered agent if you establish your LLC in the state in which you reside.
File Articles of Organization
Your articles of organization set forth your business name, registered agent and registered address, your business purpose, and who will manage the LLC. The LLC organizer signs the articles of organization and files them with the Secretary of State. You can do it yourself using an LLC formation service company to draft and file the articles of organization. Your state may also require you to draft an operating agreement, similar to corporate bylaws, that spells out who runs the LLC.
Get an EIN, Bank Account, and Business Licenses and Permits
Apply for an Employment Identification Number (EIN) for your business with the Internal Revenue Service. This number acts like a social security number for your business. You will need this number to open business bank accounts in your business name and apply for business licenses and permits.
Whether you are a blogger, host a podcast, or make videos, content creators can benefit from the business structure of an LLC.
Related Resources:
How to Become an Influencer (FindLaw Law and Daily Life)
Starting a Limited Liability Company (LLC) Checklist (Learn About the Law)
Business Formation Made Simple (FindLaw Legal Forms and Services)
