You did it! You’re making money from content creation, which means you’re a creator business. Now it's time to make it official. Here’s how to decide the right entity for you.
Imagine you’re the star of your own show - that’s what a sole proprietorship is like. You’re the boss, the creator and everything in between. A sole proprietorship is a business owned and run by one person in which there is no legal distinction between you, the owner and you, the business. Basically, it’s you running the show, and setting this up is as simple as it gets. No fancy legal stuff, promise. If you’re flying solo and not partnering up, this is your best path.
But here's the deal: while it's super simple, you might want to think about keeping your business and personal stuff separate. That way, if anything goes sideways in your business, your personal stuff stays safe.
For instance, let's say you're a creator named Norma Juicerman. You've just started your own creator business, and things are going well. You've set up a business bank account, a separate email address for brand communication and you're keeping track of all your business-related expenses. This approach is invaluable when a disgruntled brand threatens legal action. The separation provides peace of mind and allows Norma to address the issue professionally, without jeopardizing her personal assets.
Now, if you want a bit more protection for your personal stuff while you create content, say hello to Limited Liability Company (LLC). This option keeps your personal assets safe if any business bumps come your way. But remember, there are some costs involved - the set up and yearly fees. Don’t sweat it, though, these costs can be written off when you’re doing taxes.
Here’s the trick: If you’re separating your personal and business expenses, then filing as an LLC or a sole proprietorship is about the same. The trick is to keep your business in your business bank account, and your personal stuff in your personal bank account. And no, Venmo and PayPal for your business don’t cut it.
You know when your content starts making serious money? That’s when an S-Corp might make sense. Think of it as a more advanced version of an LLC.
Pro tip: When you hit more than $75,000 a year in profits, switching from LLC to S-Corp might actually save you money on taxes. But, and this is important, before you make any tax-related leaps, talk to an accountant. You can contact email@example.com to connect with a creator-minded CPA that understands your creator business.
❓So how do you choose? If you’re still growing your business, a sole proprietorship may make more sense. If you have personal assets or if you are doing brand deals, events or launching products, you may be exposed to more liability, and in that case, an LLC may be better suited for you. If you’re making serious money, consider an S-Corp.
Now, it’s up to you to think about your business and decide the best route for you, so that you can get back to doing what you do best - creating!
Just remember, no matter what, a business bank account is your first step in the right direction. To start, open a creator banking account today.