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If you’re a content creator on YouTube, you might be wondering whether it’s necessary or beneficial to form a limited liability company (LLC) for your channel. In this guide, we’ll delve into the considerations and advantages of establishing an LLC for your YouTube endeavors.
Forming an LLC for your YouTube channel can offer a range of benefits that contribute to the growth and protection of your online presence. By creating an LLC, you can separate your personal assets from your business liabilities, providing a layer of protection in case your channel encounters legal issues or financial setbacks. This means that your personal assets, such as savings and property, are generally safeguarded.
Operating your YouTube channel as an LLC can also enhance your professionalism and credibility in the eyes of your audience, sponsors, and potential collaborators. An LLC can demonstrate a commitment to responsible business practices. Additionally, LLCs offer tax benefits like flexibility, allowing you to choose between pass-through taxation or electing to be taxed as a corporation, depending on what aligns best with your business goals and financial strategy. For more information on what an LLC is, see our LLC definition page.
Throughout this guide, we’ll provide you with helpful insights and step-by-step instructions on how to form an LLC for your YouTube channel, empowering you to make informed decisions about the future of your content creation endeavors.
One top motivation for creating an LLC for YouTube channel owners is the personal asset protection provided by this business structure. Whether you operate a simple channel where you post occasional videos or have fleshed out your YouTube presence with an integrated eCommerce website, you need the limited liability protection that an LLC can provide.
Even with a basic YouTube channel, you run the risk of (either knowingly or unknowingly) violating copyright laws, or committing libel or slander. If you find yourself on the business end of a defamation lawsuit or copyright claim, a sole proprietorship or general partnership will not provide the asset protection you need.
On the other hand, if you form an LLC for your YouTube channel and you operate and maintain that LLC in a compliant fashion — in short, like a separate legal entity — the scope of your viewer’s lawsuit will be limited to your business assets. In other words, your personal assets will be protected by the business structure you’ve chosen.
The LLC’s options for taxation are another major advantage, although not to the same degree as you’d find with some other business types. Still, the LLC provides more options than you’d get from an informal business entity or a corporation.
Your YouTube LLC can be taxed as a sole proprietorship (for single-member LLCs) or general partnership (see multi-member LLCs definition), which is the default option. With this tax structure, your business itself does not pay taxes, but rather the profits are passed through the business entity, and you pay taxes on that money when you file your own personal taxes.
You can also choose for your YouTube business to be taxed as a C corporation, although this option isn’t very popular because it subjects your business to what’s known as double taxation — meaning that your profits are taxed first on the corporate level and again on the personal level when they’re distributed to you.
The other option is S corporation taxation. There are quite a few limitations to electing S corp taxation, but most U.S.-based YouTubers have no trouble meeting these requirements — your business cannot have more than 100 owners, they all must be either residents or citizens of the United States, and so on.
In theory, S corp taxation can help your YouTube business save money by reducing your self-employment tax burden. Instead of paying self-employment taxes (a 15.3% tax that includes the employer and employee portions of Medicare and Social Security) on all of your business income, you can pay yourself a reasonable salary for your role and only pay self-employment tax on that portion of your income, while you can reinvest the rest of it into your business without paying this tax.
The problem with electing S corp taxation for YouTubers is that you simply don’t have many business expenses to invest that extra money into. Other than your computer, there just aren’t many costs usually associated with a YouTube channel. Therefore, the IRS might (rightfully) have some questions if it sees you leaving lots of money in your business structure.
Finally, an LLC structure can enhance the credibility of your YouTube business venture. Informal business entities don’t have exclusive assumed business names and typically operate under the personal name(s) of their owner(s). For instance, if your name is Johnny Smith and you operate a YouTube channel, your company’s name is also “Johnny Smith,” which obviously isn’t a great name for a business.
In this scenario, you could register a DBA (doing business as) name to give your business the ability to operate under an assumed business name, but DBAs have no exclusivity regarding their naming rights in many states. This means that if another YouTuber wants to use your DBA name as their own, they’re not only allowed to do so, but they can actually register a formal business entity with that name, preventing you from continuing to use your own assumed name (see doing business as definition for more).
With an LLC, you not only have the rights to exclusive use of a business name, but you will also have either the phrase “limited liability company” or the letters “LLC” (or a similar designator) in that business name. This provides your business with a jolt of respectability because sponsors respect the professionalism displayed by an LLC. Also, customers typically feel more comfortable writing checks to a business entity rather than to an individual. Don’t forget you are going to need a channel logo for your YouTube push.
The formation process for LLCs varies depending on which state you’re forming one in, but in general, the process has some universal steps that need to be taken no matter what state your business is located in.
If you want a comprehensive overview of all the steps required to form an LLC, check out our complete guide on the topic. The basic steps in the LLC formation process in any state are as follows:
Coming up with the perfect name for your new LLC is an important step. You’ll need to choose a name that represents your company and describes what you do, and you’ll also have to make sure it isn’t already in use by checking your state’s business database.
Your LLC’s registered agent (which can be an individual or a professional service) is responsible for receiving important document deliveries from the state — like service of process or annual report reminders — and forwarding them to you. The registered agent ensures that the state always has a reliable point of contact for your business.
The form used to create an LLC is usually called the Articles of Organization, although the name can vary (some states call it the Certificate of Formation or something similar). You’ll need to provide the state with some basic information about your business and its owners. In exchange, the state will formally create your LLC.
The Employer Identification Number (EIN) is a federal tax ID number that essentially functions as a Social Security number for a business. The EIN allows your business to hire employees, pay taxes, apply for bank loans, and more. You can obtain an EIN from the Internal Revenue Service free of charge.
New in 2024, your YouTube Channel LLC is required to file a beneficial ownership information report, or BOI report. You’ll file this report with the Financial Crimes Enforcement Network, providing vital information about your LLC’s “beneficial owners.” Beneficial owners are people who control the LLC or get significant economic benefit from it. It’s crucial to file this report by the deadline to maintain compliance; failing to file means you won’t be operating your YouTube channel business legally and you could face hefty legal and civil penalties.
Most states don’t require operating agreements, but every LLC should have one regardless. This is an internal document that outlines several key operational aspects of your LLC. The value of the operating agreement is how it can help prevent ownership disputes down the line by clearly explaining how the LLC will be run.
You will need a business bank account for your LLC, and you’ll probably want a business credit card for work-related expenses as well. It’s also a good idea to use accounting software like QuickBooks or even hire an accountant to handle your bookkeeping for you.
Depending on your state, you may need a general business license to operate your LLC in compliance with state requirements. It’s unlikely that your YouTube channel will need any industry-specific licenses, but that doesn’t mean you won’t have any responsibilities in this area. Don’t forget to check with your state to see if there are franchise or privilege taxes assessed on LLCs, and also see if your municipal and/or county government entities have any further licensing requirements.
Again, these requirements can vary by state, but most states require some sort of regular report to ensure that your LLC’s info is up to date in the state’s business database. Some states require reports each year, while others only require them biennially or not at all. No matter what your state requires, you’ll need to stay on top of it to keep your LLC in good standing.
Practical Ecommerce’s “16 Tools to Grow a YouTube Channel” is a great place to start for any YouTuber looking to expand their viewership. This list includes both free and paid tools, ranging from channel management tools to social media integration, and just about any YouTuber can learn something from combing through these resources.
Out of the 925 is a tool that helps people expand their digital reach through social media, and their “How to Start a YouTube Channel on a Budget” article is an excellent resource. They include recommendations for cameras, audio equipment, lighting, and software. They even have an “Under $200 YouTuber Kit” that enables you to start your own professional YouTube channel for less than $200.
VloggerPro says that they can provide “everything you need to start a YouTube channel and the tools to monetize it effectively.” They provide a ton of value when it comes to recommendations, as they point out plenty of great products and services that are either free or low-cost tools to help YouTubers grow their channels.
GeekFlare provides a list of their top 22 YouTube tools “to grow audience, revenue, and more.” They have links to editing and recording software, SEO boosters, productivity management programs, social media integration tools, keyword tools, and so much more.
Starting a business can feel like a busy, overwhelming time, but it doesn’t have to feel like you’re doing everything alone with ZenBusiness at your side. We specialize in the “red tape” side of business. Whether you need help starting a new LLC, maintaining a registered agent, staying compliant, or anything in between, we can help. Let us manage the paperwork so you can focus on what you love: creating the best YouTube content in your industry.
What liability risks do YouTubers face?
The main issue YouTubers have in this area is in regard to intellectual property rights. If you use a clip or a song or video without permission, the media’s owner could sue you. In addition, if you (knowingly or unknowingly) commit libel or slander, this is another situation that could result in a lawsuit.
What is an LLC?
LLCs are formal legal entities that are typically taxed similarly to sole proprietorships and general partnerships, in that the owners include any company profits or losses into their personal tax returns — the LLC itself does not owe income taxes.
An LLC may also elect to be taxed like a corporation, although this is not a very common option. There are similarities to corporations too, especially when it comes to financial responsibilities. In an LLC, the owners or members are not usually personally accountable for the financial status of the business. This means that if someone sues your LLC, your personal assets are usually not at risk.
Why should I hire an LLC service when I can form my own LLC?
The do-it-yourself route is always an option for LLC formation. However, LLC services are so affordable that there’s really no good reason not to use one these days. In addition, some of these companies often throw in free bonus features that make them an even better bargain.
How much does it cost to form an LLC?
The costs of LLC formation can vary quite a bit depending on which state you’re forming one in. For in-depth information about LLC formation costs in your specific state, take a look at our guide to state-by-state expenses.
Why should I form an LLC instead of a corporation?
Everyone’s situation is different, and we’re not here to provide legal advice. That said, the limited liability company has some concrete advantages over the corporation that makes it the preferred option for most small businesses.
Corporations tend to have more complex formation and maintenance requirements, and they don’t have the taxation advantages of an LLC. The corporation has some advantages of its own (for example, it’s easier to attract investors to a corporation) that make it worth a look, but the LLC is a simpler and more flexible business structure.
Can I serve as my LLC’s registered agent?
You certainly can. Every state allows entrepreneurs to serve as their own registered agents. However, while the role of the registered agent can seem like that of an unnecessary middleman, there is more complexity to this position than some people realize.
For instance, you would need to be present and available at your business location during all standard business hours.
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Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Written by Team ZenBusiness
ZenBusiness has helped people start, run, and grow over 700,000 dream companies. The editorial team at ZenBusiness has over 20 years of collective small business publishing experience and is composed of business formation experts who are dedicated to empowering and educating entrepreneurs about owning a company.
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