LLC vs. S Corp for Content Creators: Pros and Cons
Choosing the right business structure is a critical decision for content creators and influencers looking to protect their assets, manage taxes, and grow their brand. That’s why choosing between an LLC or S corp for content creators is critical.
Two popular options are the Limited Liability Company (LLC) and the S Corporation (S Corp). But which one is right for you? Let’s explore the pros and cons of each.
What is an LLC?
A Limited Liability Company (LLC) is a flexible business structure that combines the benefits of a sole proprietorship with the legal protections of a corporation. It’s a favorite among small business owners and freelancers because it’s easy to set up and maintain.
Pros of an LLC for Content Creators:
- Personal Asset Protection: Your personal assets (like your house or car) are generally protected if your business faces legal issues or debts.
- Privacy Benefits: When you have an LLC, you also get an Employer Identification Number (EIN), which you can use instead of your Social Security Number (SSN) on contracts, partnership agreements, and online signups.
- Credibility: Operating as an LLC adds professionalism to your brand, which can attract partnerships and clients. It also adds credibility in the eyes of the IRS, ensuring you receive the write-offs of a small business.
Cons of an LLC for Content Creators:
- Annual Fees: Some states charge annual fees or franchise taxes for maintaining an LLC, which can add to your expenses. However, these fees are low and typically range from $150-$250 per year.
What is an S Corp?
An S Corp is not actually a business entity like an LLC. Instead, it is a tax designation that LLCs can elect. It offers potential tax savings but comes with stricter requirements and responsibilities.
Pros of an S Corp for Content Creators:
- Tax Savings: The biggest draw of an S Corp is that you can save on self-employment taxes. As an owner, you pay yourself a reasonable salary, which you do pay self-employment taxes on. Then you can take the remaining profits as distributions, which are not subject to self-employment taxes.
- Personal Asset and Privacy Protection: Like an LLC, an S Corp protects your personal assets from business liabilities and lets you use an EIN instead of your SSN.
Cons of an S Corp for Content Creators:
- Complex Setup and Maintenance: Electing S Corp status requires filing additional forms with the IRS and adhering to more rules.
- Reasonable Salary Requirement: You must pay yourself a reasonable salary, which means you can’t avoid payroll taxes entirely. Determining this amount can be tricky and we highly recommend working with a professional to help you set up payroll properly and set the appropriate salary amount.
- Additional Costs: Running payroll for your salary requires extra work or hiring a payroll service, which adds to your expenses.
How to Choose: LLC or S Corp?
The choice between an LLC and an S Corp depends on your income level, business goals, and how much effort you’re willing to put into managing your business structure. As a general rule, if you are making more than $100,000 per year from your content creation, it likely makes sense to elect as an S Corp. At that income range, you could save $10,000+ per year in taxes!
LLC: Best for Simplicity
If you’re just starting out as a content creator and your income is modest, an LLC is a great choice. It provides legal protection, is easy to set up, adds no additional taxes, and doesn’t require much paperwork. You can always switch to S Corp taxation later as your income grows.
S Corp: Best for Tax Savings
If your content creation business is earning significant income (e.g., $100,000 or more annually in net profits), the tax savings of an S Corp can be worth the extra effort. By paying yourself a reasonable salary and taking the rest as distributions, you can reduce your self-employment tax burden.
Final Thoughts
Both LLCs and S Corps offer significant benefits for content creators, but they cater to different needs and income levels. Start with an LLC if you want simplicity and flexibility, then consider electing S Corp status as your income grows.
We can help with both LLC and S Corp setup and management for content creators and influencers. Book a call with us to figure out what will work best for you. With the right structure in place, you can focus on creating amazing content while confidently managing your business.
