When you’re an actor, your brand is your business—but does that mean you should incorporate yourself? Here’s everything you need to know about becoming an LLC or S Corp as an actor.
When you incorporate yourself, it means that you formally recognize your business as a separate legal entity. You might choose to incorporate yourself as a business because it offers limited liability. This means that you won’t be held responsible for debts and losses accrued by your business, only the money that you personally invest. So even if your voiceover career doesn’t pan out, the bank can’t come for your personal possessions.
A Limited Liability Company is a business structure that provides limited liability protection to its members. An LLC offers the same limited liability benefits received by corporations, plus the pass-through taxation status of sole proprietorship or a partnership. LLCs aren’t taxed directly for profits earned by the business. LLC owners can separate their business from their personal assets— the latter is protected from the company’s accrued debts and liabilities. While regulations vary by state, actors and other individuals and entities can become an LLC nationwide.
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An S corporation is another type of business structure that lets owners avoid double taxation by passing income and losses to shareholders. Like an LLC, an S corp enjoys pass-through taxation, meaning income taxes are passed on to shareholders to declare on their personal returns. An S corp differs from an LLC in that it has limited shareholders (up to 100), it can only have domestic shareholders, and it experiences ownership and stock restrictions that LLCs do not.
You may be wondering, like @TheRealActor did on the Backstage Community Forums, if it’s worth it to become an LLC or S Corp—and if so, which one offers the most advantages to actors. The real question to ask yourself isn’t whether you should incorporate as an LLC or an S Corp, but whether you should incorporate at all. Incorporating allows for asset protection and tax benefits, but it can be complicated and costly, and it requires ongoing maintenance. Your personal income level and earning consistency should be key to your decision-making.
Before incorporating, take these factors into consideration:
Go over your income: You’re probably aware that most people whose income comes from the entertainment industry deal with high levels of inconsistency. An actor is considered a “solopreneur”—an individual who runs a one-person business. Although the upfront cost of incorporating can be hefty, if you have an income of six figures or more, the move will likely save you money in the long run. It’s also important to consider extraneous factors—if you’re married or single, and if you rent or own.
Consult a professional: Since each state has its own set of laws and qualifications with regard to these different business formations, it’s always prudent to speak with a certified tax accountant in your area before making any major decisions. Accountant Craig Manzino, who specializes in helping actors incorporate, says that the decision comes down to simple math. “We run the calculus, and ask if we can save you enough money,” he told the New York Times.
Weigh the pros and cons: The two main advantages to incorporating are tax write-offs and personal liability protection. If you’re earning enough money to consider becoming incorporated, it can be a big advantage to be set up as an LLC or an S Corp. Being a W-2 actor is much less complicated, but it has extremely limited tax benefits, since you’re not permitted to deduct expenses. Filing as a business allows for most of your deductions to be written off.
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