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.

Which Business Entity Is Right for an Influencer?

The decision to form a business entity is the right one for serious influencers. But the specific entity type matters enormously for tax purposes, governance flexibility, and long-term business planning. Here is a practical analysis of the main options.

The LLC: The Most Common Choice

The Limited Liability Company (LLC) is the entity type most commonly recommended by attorneys for solo influencers and small creative businesses, and for good reason. An LLC provides the liability shield described above — protecting personal assets from business judgments and debts — while offering maximum flexibility in how the business is taxed and governed.

By default, a single-member LLC is taxed as a “disregarded entity,” meaning the business’s income and expenses flow directly to the member’s individual tax return (Schedule C). This is simple but means that all net business income is subject to self-employment tax (currently 15.3% on the first $168,600 of net earnings as of 2024, plus 2.9% on everything above that). However, an LLC can elect to be taxed as an S-corporation — which can produce material tax savings for influencers with consistent net income above approximately $50,000-$80,000 annually by allowing a portion of income to be treated as a distribution rather than self-employment income.

The S-Corporation Election

An LLC taxed as an S-corporation — which requires filing Form 2553 with the IRS — allows the influencer to split business income between a “reasonable salary” (which is subject to payroll taxes) and distributions (which are not). The IRS requires that the influencer-owner pay themselves a reasonable salary commensurate with what the market would pay for the same services. However, if the business generates $200,000 in net income and the reasonable salary is determined to be $80,000, only the $80,000 salary is subject to self-employment/payroll tax — potentially saving more than $15,000 in payroll taxes annually. The tradeoff is increased administrative overhead: S-corporations require payroll processing, payroll tax filings, and a separate corporate tax return (Form 1120-S).

Operating the Corporate Entity Correctly: Avoiding “Piercing the Veil”

Forming an LLC or corporation creates the legal liability shield, but that shield can be “pierced” — removed by a court — if the owner fails to respect the separation between personal and business activities. Courts apply the doctrine of “piercing the corporate veil” when the corporate form is used as a sham to perpetrate fraud or when the owner fails to maintain the entity as a genuinely separate enterprise. For influencers, the most common grounds for veil-piercing include:

• Commingling personal and business funds — always maintain a separate business bank account and never pay personal expenses from business accounts
• Failing to maintain basic corporate formalities — for LLCs, this means having and following an operating agreement; for corporations, it means keeping corporate minutes and holding at least annual meetings
• Undercapitalization — the business must have sufficient assets to meet its foreseeable obligations; a thinly capitalized entity used purely to shield assets may not receive the full benefit of the corporate form in court

Contracting Through the Entity

Once a business entity is formed, all influencer agreements must be signed by the entity — not by the individual influencer personally. Contracts should be signed with the company name (“[Company Name] LLC, by [Individual Name], its Manager”) and all invoices should be issued by the entity. If a brand insists on contracting with the individual rather than the entity, this should be flagged with your attorney. In some circumstances, a brand can argue that a personal guarantee or personal involvement in the contractual obligations creates personal liability notwithstanding the corporate form.

Multi-Member Entities for Influencer Collaborations

When two or more influencers create content together and jointly monetize a channel or platform account, the business relationship should be formalized. Without a governing agreement, the relationship is likely treated as a general partnership by default under state law — meaning each partner has unlimited personal liability for the debts and obligations of the partnership, including the actions of the other partner. A multi-member LLC with a well-drafted operating agreement that specifies ownership percentages, profit distribution, decision-making authority, and exit rights protects all parties.

Selecting the right entity and operating it correctly from the start saves significant legal and tax costs down the road. Contact the Business attorneys at Revision Legal or visit our business law practice page to discuss forming the right entity for your influencer business.

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.