When Should I File as an S Corp as a Content Creator?

If you’re a content creator or influencer making a steady income from YouTube, TikTok, Instagram, Twitch, or any other platform, you might be wondering when it makes sense to structure your business as an S Corporation (S Corp).

Although it might sound like a big step, choosing the right business structure can save you money and provide legal benefits. Let’s break down what an S Corp is, its advantages, and when you should consider filing as one.

What Is an S Corp?

An S Corp is a tax classification, not a business entity. Creators often ask us whether they should be an LLC or an S Corp. The answer is, you can be both. The LLC is the business entity that provides you with legal protection, and the S Corp is a tax classification that changes how you handle your taxes.

An S Corp is a pass-through entity, meaning that your income passes through to the owner and is taxed on their individual tax return. Instead of paying corporate income tax, business earnings are reported on your personal tax return. However, S Corps require more paperwork and formalities than a sole proprietorship or LLC.

For content creators, S Corps are appealing because they can lower self-employment taxes. However, it’s not ideal for everyone, so timing is key.

The Key Benefits of an S Corp for Content Creators

1. Tax Savings on Self-Employment Taxes: As a sole proprietor or single-member LLC, you pay 15.3% in self-employment taxes (Social Security and Medicare) on all your net earnings. With an S Corp, you can split your income into two parts: a reasonable salary and distributions. You’ll pay self-employment taxes only on the salary portion, while the distributions have none which can potentially save you thousands of dollars each year.
2. Limited Liability Protection: We recommend that creators start an LLC. You’ll need to have one in order to elect as an S Corp. The LLC provides a legal separation between you and your business, protecting your personal assets in case of legal issues or debt.

When Should You Consider Filing as an S Corp?

While an S Corp offers tax advantages, it comes with additional responsibilities like payroll, bookkeeping, and legal compliance. Here’s when it makes sense to switch:

1. When Your Income Exceeds $100,000 Annually

If you’re earning more than $100,000 per year, an S Corp may provide significant tax savings. We typically see content creators and influencers save around $10,000 in taxes as an S Corp at that income level.

2. When You’re Ready for Payroll & Compliance

S Corps require you to pay yourself a reasonable salary through payroll, which means setting up tax withholdings and making quarterly tax payments. This is the busy work that often scares off creators and influencers. If administrative tasks aren’t your thing, you can always hire help to manage that for you!

3. When You Can Afford Professional Help

Managing an S Corp requires tax planning and compliance, as well as payroll management for your salary and distributions. Once you reach that six-figure mark, it’s a great investment to hire an accountant or financial advisor. We work exclusively with content creators and influencers to help you maximize your savings while staying in compliance with IRS regulations.

When an S Corp Might Not Be the Best Choice

• If you’re making less than $100,000 per year, the tax savings might not outweigh the costs of payroll services and compliance.
• Your monthly income can range a lot when you first start as a creator. It’s usually best to keep things simple as an LLC until you understand your income better, so you can plan for regular payroll.
• If you don’t want to handle extra paperwork, S Corps require corporate formalities like board meetings and record-keeping, which can be a hassle. (Here’s our shameless plug: we handle the paperwork for our clients, so it doesn’t have to be a big drain on your energy. Book a call today and let us handle everything!)

How to File as an S Corp

If you decide an S Corp is right for you, here’s how to make it happen:

1. Form an LLC (if you haven’t already): Most content creators start by forming an LLC, which provides liability protection. If you haven’t done this yet, we can help you get it set up. (Book a call to find out more about the types of work we do here at Cookie Finance for content creators.)
2. Elect S Corp status: File IRS Form 2553 to elect to be taxed as an S Corp.
3. Set up payroll: You’ll need to determine a reasonable salary for yourself and withhold taxes accordingly. This is very important, as the IRS may penalize you if you set your salary too low. We help influencers set a reasonable salary so they avoid any issues.
4. Stay compliant: Maintain corporate records, file annual reports, and make estimated tax payments to stay in good standing.

Conclusion

Choosing when to file as an S Corp as a content creator depends on your income level, business growth, and willingness to manage additional administrative tasks. If you’re consistently making more than $100,000 a year and looking for tax savings, an S Corp might be a smart move. However, if you’re still growing or prefer a simpler setup, staying as an LLC could be a better choice for now. Give us a call and we’ll be happy to guide you to the solution that works best for you!