How should content creators and influencers structure their business?

Whether you're a YouTuber, podcaster, or a blogger, you're not just creating content; you're running a business. And just like any business, how you structure it can have significant tax and legal implications.

Your legal structure will impact how much you pay in taxes, your level of personal liability, and how you can raise capital. Here’s a break down of the primary business structures and what to consider when choosing what’s right for your business.

Sole Proprietorship: The Simplest Form

Many content creators start as sole proprietors without even realizing it. If you're making money from your content and haven't registered a business, you're a sole proprietor by default.

• The upside? It's simple and doesn't require any formal paperwork to start.

• The downside? Your personal assets are at risk if you have any legal issues.

• How is it taxed? All of your net income is subject to self-employment tax (~15.3%) + ordinary income tax (~25%)
  

LLC: The Flexible Choice

Once you start considering yourself a “business,” people look to setting up a Limited Liability Company (LLC) as a popular fist step. While this offers the same tax benefits (simplicity) as a sole proprietorship, it provides no additional tax savings.

In fact, LLCs often have additional taxes to pay (for example, a $25 annual fee in NY or an $800 minimum annual fee in CA). However, an LLC does provide liability protection.

What we like about LLCs is that they give you flexibility. Having this entity allows you to elect a different tax status - such as an S-Corp - down the line.

• The upside? It offers liability protection

• The downside? No additional tax benefits over a sole prop & often additional state taxes.

• How is it taxed? All of your income is subject to self-employment tax (~15.3%) + ordinary income tax (~25%)
  

S-Corp: The Tax-Savvy Option

When you start making substantial income from your content, an S-Corporation is probably worth considering. The right time to switch to an S-Corp varies based on where your business operates, but in NYC or CA it’s typically around $100k in net income.

Why wait until then? Having an S-corp is much more complex to set up and manage. It requires you to put yourself on payroll, maintain a set of financial statements that includes a balance sheet & income statement, and file a completely separate corporate tax return with complex state and local tax considerations.

While that may sound scary, it does allow you to save on self-employment taxes and execute more sophisticated tax planning strategies (for example, the Pass Through Entity Tax). At $100k+ in net income this could mean tens of thousands of dollars back in your pocket each year.

• The upside? It offers significant opportunities for tax savings & liability protection. You’re also way less likely to be selected for an audit.

• The downside? It’s much more complex to manage between proper bookkeeping, payroll, and corporate tax filings.

• How is it taxed? The S-corp typically only pays state & local tax. The net income passes through to your personal tax return where you only pay self-employment tax (~15.3%) on your salary + ordinary income tax (~25%)
  

C-Corp: The Big Leagues

The C-corp is not right for most people. Unless you’re looking to raise capital from investors, a C-corp will often result in paying more tax than the other options.

• The upside? Liability protection and the ability to more easily raise capital (investors often prefer C-corps)

• The downside? It’s complex to manage, requires a separate corporate filing, and often times results in a higher tax rate than options like an S-corp.

• How is it taxed? The C-corp pays federal, state & local tax. When you take money out of the business, it’s taxed again as income to the owner.

Key Takeaways:

• Sole Proprietorship is the simplest but comes with personal liability.

• LLC offers flexibility and liability protection, but no real tax benefits.

• S-Corp can save you a significant amount on taxes, but is more complex to mange.

• C-Corp is for those aiming to bring on outside investors, and comes with double taxation.

☝️ Still not sure what’s right for you? Schedule a Consultation with us!