Should I Open an LLC Business for My YouTube Channel?
Business Entity Formation
There are several business entity formations that YT channel owners/operators can choose from when incorporating their business. The easiest to form and most popular with businesses operated by one person are S corporations and LLCs. These are all pass-through corporations. The income earned from these business entities is recorded on the owners’ personal tax returns. This means that they are taxed at the individual’s personal tax rate. To avoid paying personal taxes on the income earned from the YT channel, the owner/operator may consider forming a C corporation. C corporations are great because they are eligible for numerous tax breaks and deductions, provide legal and financial protection, and can retain their earnings. They do require more work (e.g., financial filings, annual meetings, more paperwork to set up) though. Some owners/operators may not have the time to do all the required work necessary to maintain their C corporation status. The solution to this quandary is running an LLC with a C corporation tax treatment. The LLC is easier to operate, requires less paperwork to set up, and has fewer administrative requirements than a C corporation. Most importantly, this election enables you to take lots of tax deductions (e.g., research and development, education, market exploration), retain your earnings, hire yourself as an employee or an independent contractor, and pay US$0 in taxes.Tax Benefits
Legal and Financial Protection
Final Thoughts
If you plan to treat your YT channel like a business or earn money from it, then you should treat it like a serious business. Incorporate the business and give yourself the best tax treatment status possible – LLC with C corporation tax treatment status. In addition, to insulating you from the problems that may afflict your business, the LLC with C corporation tax treatment gives your business more credibility, allows you to withdraw funds from it in three different ways (i.e., as an owner, independent contractor, employee), and makes it clear that you are operating a business.
