LLC For Entertainment Businesses
The entertainment industry has been one of the country’s most profitable and thriving sectors for ages. So, it is no shock that more and more people continue to test their luck by stepping into this business. If you are launching a business in one of its sectors, the first thing you have to do is select the type of business structure you wish to register your company.
There are several options to choose from, such as a corporation, sole proprietorship, and even a partnership if you are building your business with a friend. But, after thorough research, you may discover that a limited liability company is better fit for your business needs. But what is it?
What Is An LLC?
A Limited Liability Company (LLC) is a business structure that provides a range of advantages for entertainment businesses. For instance, it offers ease of management, pass-through taxation, and limited liability protection. It also provides tax flexibility to accommodate your entertainment business needs, encouraging growth without incurring high costs.
What Are The Advantages Of An Entertainment LLC?
There are several reasons why most professionals suggest new business owners form a limited liability company.
Limited liability protection safeguards all business owners’ personal assets, which is perhaps the most significant advantage of forming an entertainment LLC. You will never have to worry about anyone questioning, objecting to, or seizing your assets if the business ever lands in legal trouble. In entertainment, cases like these are common with issues like copyright infringement, data privacy, and more.
Starting an entertainment LLC will help you speed up the process of forming a brand image, improving client trust by boosting credibility, and attracting and retaining said clients. You can market your company as a registered company, add it to Google for Business, and attach an HQ address to your website.
LLC owners can also decide how they want their company to be taxed—a financial liberty most other business setups do not have. You can even save significant amounts every year by setting up your entertainment LLC in a state where specialized incentives and tax benefits are offered for the model. These savings can be valuable investments for your movie, show, theater, or other entertainment business ventures.
What Are The Disadvantages Of An Entertainment LLC?
For new business owners, the process of forming an LLC may seem daunting. For example, you may think filing annual reports and maintaining LLC records is a challenge. However, you can resolve this by forming your LLC in a state where you can run your business out-of-state.
Our point here is that you are following the correct steps and seeking professional guidance where you need to, making the process much easier to navigate. At StartGlobal, we’re here to make your first steps easier. With our guidance and support, we can help simplify the process, prevent costly mistakes, and ensure a smooth and successful start to your business journey.
There are no significant disadvantages to starting an entertainment LLC. However, you must be vigilant about the generic risks of starting any business, such as gaining your first clients or generating a profit.
How To Create An Entertainment LLC
Setting up an entertainment LLC can be a straightforward process if you understand and follow each step carefully. Here are the ones you need to know.
- Selecting a name
- Working with a Registered Agent
- Filing for a Certificate Of Organization
- Drafting the Operating Agreement
- Obtaining an EIN
Selecting a name
The name of your LLC needs to be unique and one that is not being used by any other registered company in the state. Most states also have a unified business name database with the Secretary of State that could be used for free. You can find this database online.
Some states require LLCs to indicate they follow an LLC business structure. You can do this using words like the following in your name:
- Limited Liability Company
- LLC and L.L.C.
- LC and L.C.
- Limited Company
You can then file an application with your Secretary of State’s office to reserve the name for up to 120 days. This will give you plenty of time to make a better and more well-thought-out decision, if you are not happy with your initial name.
Working with a Registered Agent
Appointing a registered agent is mandatory for anyone looking to form an LLC, regardless of the state where the company is being created. A registered agent is an entity that deals with receiving legal documents on behalf of the LLC. They are also responsible for handling legal papers on your company’s behalf if it is sued or in any other legal trouble. Find and appoint a well-experienced registered agent to avoid unwanted situations in the future.
They must also be available at the address listed on the official paperwork but you can change your listed agent even after your entertainment LLC’s registration.
Filing for a Certificate Of Organization
The Certificate of Organization (or Article of Organization in other states) is the legal document filed that seals the registration of an LLC. The form for this can be completed and submitted online. You can also obtain the form from the Secretary of State’s website, fill it out, and mail it to their office.
Drafting the Operating Agreement
Creating an operating agreement is not mandatory but we highly recommend you draft one. This document acts as the constitution of the LLC and should include the rules, regulations, and conditions that define how your company should be operated in the future. This will help you avoid disagreements on future issues such as income distribution and investments.
If you decide not to draft an operating document, the LLC will be run, ruled, and managed according to state laws.
Obtaining an EIN
The Employee Identification Number (EIN), also known as the EIN, is required in all states. It is the number you will be using to file taxes for the company and apply for loans. If your entertainment LLC is single-membered, you can also use your EIN to hire employees or change your LLC’s tax type to the corporation. The latter provides a ton of benefits if your business is earning a lot of profit.
You can complete your EIN application online and for free. Visit the IRS website to learn more about the process.
How Are Entertainment LLCs Taxed?
Several types of taxes can apply to your entertainment business at the federal level. LLCs usually file one or more of the following taxes:
- Self-employment tax
- Employment/payroll taxes
- Franchise tax
The tax obligations of an LLC vary from state to state. Each state has its own unique taxation policies, with some offering lower and more lenient tax regulations compared to others. If you think your state is not the best place to form an entertainment LLC in, you can look into others and appoint a registered agent that lives there to help you manage it.
What Are The Costs Of Starting An Entertainment LLC?
Starting an entertainment LLC involves careful financial planning and the consideration of various costs. These include state formation fees and filing charges, which can vary between $50 and $300 depending on the state.
State filing fee
Registered agent service
LLC formation service
Business license and permits
Employer Identification Number (EIN)
Initial legal and accounting fees
Marketing and advertising
Another expense to keep in mind when forming is hiring a registered agent. Registered agents provide services for a fee—a cost that is ongoing and must be paid for regularly.
If you ever decide to do business in the entertainment industry, there is no better option for you than setting up an LLC for it. LLCs provide better benefits compared to other structures like corporations, which can be costly, and sole proprietorships, which can be lacking in perks. More importantly, this business model protects your personal assets and is easy to form.
By establishing an entertainment LLC, you open doors to numerous opportunities to help you grow and scale your business according to your goals and plans.
For a more detailed overview of forming LLCs in various states, check one of our guides below:
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