The Best Business Structures for Social Media Influencers and YouTubers

• What Is a Business Structure?

  A business structure is the legal and organizational framework that a business operates within. It defines how the company is legally recognized, how it is owned, and how it functions. Depending on the type of business structure used, they can provide certain legal protections to the business owner, such as liability protection and can determine how that business is taxed. Different types of business structures will follow different protocols and methods of operation. One business structure may be more beneficial than another. Choosing the appropriate business structure for a new company is a vital step in ensuring the business has the best chance to succeed.

• What Are Some of the Most Common Business Structures?

  Some of the most used business structures include:

  Sole Proprietorship:

  A sole proprietorship is owned and operated by a single person that has complete control over the business. However, sole proprietorships are not considered separate legal entities from the business owner. This means that sole proprietorships do not provide the same legal protections as other business structures, which can act as barriers between the business and the business owner. Operating as a sole proprietorship means the business owner is personally responsible for any of the business's debts, liabilities, and legal obligations.

  A sole proprietorship is the simplest and most common type of business ownership, and many people utilize it without even being aware of it. Suppose you start a business and are the sole owner and operator and have not done any formal paperwork to register or incorporate it; in that case, your business can be considered a sole proprietorship by default.

  Partnership:

  A partnership is a business structure that a business could use if it is owned and operated by two or more individuals that agree to share ownership, management responsibilities, profits, and liabilities of the business. There are a few different types of partnerships, including General Partnerships, Limited Partnerships, and Limited Liability Limited Partnerships. Each type of partnership is set up differently and can provide varying degrees of liability protection to its various partners with respect to their specific roles in the company. Different types of partnerships can also distribute profits and management responsibilities in different ways. To learn more about the various types of partnerships and how they operate differently, please view our Compare Entity Types page, where you can compare and contrast the differences.

  Corporation:

  Corporations, also known as "C-Corporations," are considered separate legal entities and have their own legal rights and liabilities. Therefore, using a corporation as a business structure can provide liability protection to its owners. Corporations have formal protocols and structures that need to be closely followed and can generally be more complicated or involved to operate when compared to some of the other types of business structures. A corporation is owned by its shareholders, who hold shares of stock in the company. These owners elect a board of directors, who are responsible for making important decisions and managing the corporation's activities, although shareholders may or may not be involved in managing the business's day-to-day operations. Shares can be bought and sold to raise capital for the corporation, and there is no limit to how many shareholders a corporation can have.

  Corporations are subject to "double taxation;" they are taxed as a corporation, and the distributed profits are also taxed on the individual shareholder level. However, corporations also have certain tax advantages — such as certain tax-deductible business expenses and sometimes lower corporate tax rates — that can help reduce the effect of double taxation when combined with good tax planning strategies. Corporations are commonly used business structures utilized by companies of various sizes, ranging from small businesses to some of the most well-known large, multinational corporations.

  Limited Liability Company (LLC):

  A Limited Liability Company or "LLC" is a type of business structure that is commonly used by a wide variety of companies, including small businesses. Limited Liability Companies are a "hybrid" business structure of sorts that can utilize various beneficial aspects of sole proprietorships, corporations, and partnerships. They offer the simplicity and flexibility of sole proprietorships and partnerships while offering some of the liability protections typically associated with corporations. LLCs are considered separate legal entities from their owners and can provide a buffer between the business and the business owner. In addition to this, LLCs have some tax advantages as they can exercise flexibility in how they choose to be taxed. LLCs are popular due to their legal protections, versatility, and relative ease of set-up and management.

• Why Do Social Media Influencers and YouTubers Need a Business Structure?

  Why would a social media influencer or YouTuber need to use a separate business entity such as an LLC or corporation? Part of the appeal of making money online is being able to work from home, not dealing with managers or coworkers, and unnecessary red tape. It all seems pretty simple and straightforward. If you are a solopreneur, what's the point of complicating things by registering your business as a legally recognized separate business entity, filling out a bunch of extra forms, and paying any associated fees when you could just operate as a sole proprietorship?

  While social media influencers and YouTubers could simply operate as sole proprietorships, doing so has some significant drawbacks. Building a successful social media influencer or YouTuber business is not as solitary an endeavor as it may seem. While part of the appeal is working for yourself, by nature, these types of businesses require a lot of relationships and interactions with other people and companies. Social media influencers and YouTubers will have some form of contact with their followers, the companies that run the platforms they use, and with other businesses that can provide sources of revenue through advertising/sponsorship, collaboration, and affiliate marketing.

  All these different relationships can leave social media influencers and YouTubers vulnerable from a legal standpoint. Operating as a sole proprietorship does not offer any liability protection and could threaten a business owner's personal assets in the event of a lawsuit. This is the single biggest reason that social media influencers and YouTubers should use a separate legal entity to conduct their business.

  In addition to this, operating under a separate business entity can offer social media influencers and YouTubers certain tax advantages that a sole proprietorship cannot. By properly using a separate business entity, tax burdens can be decreased, and greater profitability can be achieved. Finally, registering a business under a separate entity, such as an LLC or corporation, can enhance a business's credibility with other companies that they interact with, presenting a higher level of professionalism.

• What Are the Best Business Structures for Social Media Influencers and YouTubers?

  What are the best business structures for social media influencers and YouTubers to use? This depends on the particular circumstances surrounding each individual business. Most social media influencer and YouTuber businesses will be single-person businesses. Running these types of businesses requires a lot of work and the ability to juggle different tasks. Therefore, a simple and easy-to-manage business structure, such as an LLC, that provides liability protection and tax flexibility may be the best option. This is why LLCs are popular among small businesses across a variety of industries. They are easy to set up and are generally low maintenance. This allows business owners to focus on developing their business rather than its administrative processes.

  However, depending on the business owners' goals, projected profitability, and whether they want to add shareholders to their business in the future, a corporation may better suit them. Forming a corporation is more involved and complex than an LLC, and it is less likely for most social media influencers and YouTubers to use it as a business structure, but it is not necessarily unheard of. Alternatively, some influencer businesses and YouTubers may actually consist of multiple people that help contribute to the business and want to form some sort of partnership.

As digital media and entertainment continue to evolve, we are likely to see a wider variety of how these sorts of businesses organize themselves. People who are serious about starting a business as social media influencers or YouTubers should take the time to consider the various options and how they relate to their long-term goals. It may be tempting to start out as a sole proprietorship and figure it out once you reach a certain level of success, but using some sort of separate business entity that provides liability protection from the beginning will ensure your personal assets are protected and that you are starting out on the right foot.

InCorp can help you choose and set up the correct business structure for your particular social media influencer or YouTube business with our entity formation services. We also offer registered agent services in all 50 states, the U.S. Virgin Islands, and Puerto Rico. Companies can also use our business entity management platform and mobile apps to help manage their business entities and easily access vital documents.

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