How to Structure Your Business as an Influencer: LLC or Sole Proprietorship?

LLC vs. Sole Proprietorship – What Should You Choose?

As your digital influence grows, you need to decide between a robust LLC and a simple sole proprietorship. This impacts everything from legal protection to taxes. Let’s understand the differences first.

Sole Proprietorship 

A sole proprietorship is simple and straightforward. It’s an unincorporated business owned and run by one individual, where the owner and the business are one and the same. 

The following features often make it a popular choice:

1. Ease of Formation

Starting a sole proprietorship is easy and requires minimal paperwork. You can simply start conducting business if your groundwork is sorted.

2. Total Autonomy

As the sole owner, you have complete control over all business decisions and operations.

3. Simple Tax Filing

Business income is reported on your personal tax return, simplifying the tax process.

A lot of creators, however, underestimate the following challenges:

❌ Credibility Concerns

First impressions matter. Sole proprietorships are often perceived as less credible or lacking the professional edge of formal business entities like LLCs.

❌ Risk Exposure

You are on the hook for all business debts and legal actions. One lawsuit or financial blow is all it takes to put your personal assets at risk.

❌ Limited Growth Potential

Investors often hesitate to fund unincorporated businesses. Raising capital, therefore, becomes challenging. Even if you “start up” as a sole proprietor, get ready to scale up as an LLC. 

Limited Liability Company (LLC)

An LLC is a hybrid business structure that combines the merits of a corporation with the flexibility of a sole proprietorship. The best of both worlds.

Here’s why an LLC is a smarter choice for influencers:

1. Limited Liability Protection

An LLC separates your personal assets from business finances. This means your personal assets are protected from business debts and lawsuits.

In the event of financial challenges, only the assets owned by the LLC are at risk—keeping your personal wealth safe.

2. Tax Benefits

Unlike sole proprietorships, LLCs offer various tax options. You can choose how you want to be taxed—whether as a sole proprietorship, partnership, S corporation, or C corporation, depending on what suits the pulse of your business.

This results in significant tax savings.

3. Professional Credibility

An LLC designation helps enhance your professional image aka brand appeal to potential investors, collaborators, and brands. It fosters trust and confidence in your influencer endeavors, opening doors to lucrative partnerships and investment opportunities.

4. Operational Flexibility

LLCs come with minimal formalities and record-keeping requirements. This makes it easier to manage your business, freeing up time and resources for creation and audience engagement.

5. Growth Opportunities

LLCs attract investors more easily than sole proprietorships, offering opportunities for expansion and increased revenue streams. With an LLC, your influencer journey has the potential to flourish into a thriving business. 

Why Top Influencers Prefer LLC Over a Sole Proprietorship

Your favorite influencers started off as creators and built their business empires.

Forming an LLC has tipped the scale in their favor and here’s why:

Safeguard Personal Assets

A disgruntled follower sues you for defamation. Worse, a brand claims you breached a contract. Operating as a sole proprietorship puts your personal wealth on the line in such cases.

An LLC, on the other hand, separates your personal and business assets, providing a crucial layer of protection.

Credibility and Professionalism

An LLC structure demonstrates a high level of professionalism and commitment to your business. And brands or potential partners are more likely to collaborate with you.

Owning an LLC ups your influencer game and invites the best sponsorships and partnerships.

Tax Benefits and Flexibility

Taxes could be living nightmares. Or a strategic tool if you build your LLC.

Unlike sole proprietors who pay taxes on all business income, LLCs offer “pass-through taxation.” This implies the business profits “pass through” to your personal tax return, potentially putting you in a lower tax bracket. 

Funding and Investment

Big dreams need big bucks. Your potential investors love the limited liability protection LLCs offer. This means you can share ownership and even profits with investors who believe in your brand.

And it makes securing funding for expansion, marketing campaigns, or other business needs easier.

Scalability and Growth

Even if you started as a solo influencer, at some point, you would want to grow your brand into a larger enterprise.

An LLC provides the necessary structure to support this growth.

You can onboard partners, issue membership interests, and even convert to a corporation later if needed—an option unavailable to sole proprietors.

How doola Helps You Form an LLC as an Influencer 

Forming an LLC may seem overwhelming, but it doesn’t have to be—doola is here to make it a breeze.

Here’s a step-by-step guide to solidifying your influencer business:

Step 1: Choose a Business Name

Your company’s name should shine, reflecting its unique personality and building brand equity. Choose a name that’s simple, catchy, and inviting. Brainstorm ideas that align with your company’s values and vision, and complies with your state’s LLC naming rules.

Make sure you check if the domain name is available for your website.

Step 2: Appoint a Registered Agent

To open an LLC for your creator business, you must appoint a registered agent, who acts as your official point of contact for managing legal documents, state communications, and service of process.

This role is mandatory in all 50 states and can be filled by the business owner, another member, or a third-party service.

While it’s tempting for small business owners to act as their own registered agent, it’s often better to appoint someone else to ensure consistent availability and privacy.

Step 3: File Articles of Organization

This is the formal document that establishes your LLC. It includes information such as your business name, address, and the names of the owners (called members).

Each state has its own filing requirements and fees.

Step 4: Create an Operating Agreement

Although not always mandatory, an operating agreement is highly recommended for creators-turned-entrepreneurs.

This document outlines the ownership structure, roles and responsibilities of members, and operating procedures of your LLC.

Step 5: Obtain an EIN

An Employer Identification Number (EIN) is a registered document that identifies your business to the Internal Revenue Service (IRS) for tax purposes. With an EIN, your LLC can open a business bank account, adding a layer of legitimacy to your entire operation.

It’s a crucial step to take your business to the next level.

Step 6: Register for State Taxes and Obtain Necessary Licenses

Depending on your location and the nature of your business, you may need to register for state taxes and obtain certain business licenses.

Step 7: Open a Business Bank Account

Keeping your business finances separate from your personal finances is crucial. Opening a business bank account helps with this and makes accounting easier.

The doola Way to Dream Big as a Creator

Team doola is here to simplify the process of forming and managing your LLC. Here’s how we can assist you:

Seamless LLC Formation

doola handles all the paperwork and filings required to form your LLC, ensuring everything is done correctly and efficiently.

Compliance Assistance

We help you stay compliant with state and federal regulations, reducing the risk of legal issues.

Tax and Bookkeeping Services

Our expert team provides comprehensive tax and bookkeeping services, helping you maximize your tax benefits and maintain accurate financial records.

Business Banking Solutions

doola offers business banking solutions tailored to the needs of influencers, making it easy to manage your finances.

Ongoing Support

Our team is always available to provide support and answer any questions you may have as your business grows.

Let’s doola it: Level Up with Your Own LLC 

Ready to turn your influence into a thriving business? At doola, we make it simple to register your LLC.

We understand the unique needs of influencers and are dedicated to helping you navigate the process of forming and managing your LLC. 

Offering a wide array of tools and services, doola helps you standardize processes, enhance collaboration, and maximize productivity.

From seamless LLC formation and robust US business banking to intuitive bookkeeping services, doola has empowered business owners from over 175 countries to build their dream companies in the US. 

Let the next success story be yours. Schedule a free consultation today.

FAQs

Should I start as a sole proprietor or LLC owner?

Many new businesses begin as sole proprietorships due to their simplicity and low cost, especially when testing a new business idea. Unlike an LLC, starting a sole proprietorship typically doesn’t require state paperwork.

Although you might need a local business license or permit, the process remains straightforward and budget-friendly, making it an attractive option for budding entrepreneurs.

Do you pay less taxes with an LLC than as a sole proprietor?

Not really. However, LLCs offer more tax flexibility and you can choose how you want to be taxed.