When social media influencers begin to achieve a certain level of success, it is time to start operating your business through a corporate business entity. Indeed, social media influencers are operating businesses. The purpose of creating a corporate entity is to protect personal and family assets from being seized by creditors because of business-related adversities.
Businesses can be operated in many forms, including:
- Sole proprietorships
- Corporations — including C-corps and S-corps
- Partnership — including limited partnerships
- Joint ventures — a type of partnership
- Limited Liability Companies
- And more
Naturally, most social media influencers start their businesses as sole proprietorships. This is, for instance, a person fabricating hand-made toys out of his or her garage. The problem is that some forms of business entities — such as sole proprietorships — do not provide any legal protections to personal and family assets unrelated to the business operations. So, for example, if a social media influencer loses a litigation case for breach of contract, false advertising, or defamation, any money judgment can be taken from personal assets — like equity in a home or bank accounts — if they have been operating as a sole proprietorship. By contrast, if the social media influencer has been operating through a corporate entity, generally, those personal assets are free from being seized to satisfy a litigation award of money damages. The judgment must be taken only from corporate assets.
Corporate entities can be created by anyone. They are created by filing various papers with the designated Office of your State government. The forms are usually very short, and the filing fees are typically very reasonable and affordable. Once created, corporate entities become distinct legal “creatures” that are separate from the natural person or persons who created the corporate entity. Corporate entities can do most of the things that natural persons can do such things as enter into contracts, hire employees, own property, open bank accounts, sue and be sued in court, etc. Because corporate entities are legally distinct from their owners, this creates what is called a “corporate shield” that protects personal assets from being seized to satisfy corporate and business debts. By operating as a corporate entity, those hypothetical lawsuits involving breach of contract, false advertising, and/or defamation are brought against the corporate entity. In this way, personal assets remain unendangered.
There are other reasons to incorporate. These include the fact that many companies who hire influencers prefer to work with companies rather than individuals. This is also true of lenders and investors. Corporate structures, for example, lend themselves well to partial investments that do not involve partnerships. A 60/40 partnership is legally dangerous for an investor in a way that a 60/40 split of a corporate entity is not.
As noted, there are various types of corporate entities. Which is best for you and your social media influencer situation should be carefully considered in consultation with an experienced business lawyer.
Contact the Business Attorneys at Revision Legal
For more information, contact the experienced Business Lawyers at Revision Legal. You can contact us through the form on this page or call (855) 473-8474.
