This research is supported by you, our readers, through our independently chosen links, which earn us a commission. Learn More
Becoming a YouTuber is one of the best ways to make money or do advertising in 2021, but with that money also comes a lot of taxes. Another risk of having a lot of money in a business is getting sued and losing all of that money. But there is a way to both protect personal assets and have a lot of taxing options. In this article, there is everything YouTubers need to know about YouTube LLC.
A Quick Preview:
What an LLC Does for YouTubers
First off, the reason why YouTubers need an LLC is that YouTubers are not employees anywhere, and they are considered a sole proprietor. That means the business is actually not a business but something personal. Some people might think being a YouTuber is not a business, while the truth is if there is any way someone can make money out of it, that should be considered as a business. For a YouTube channel, you have investment, return value, taxing, and even getting sued and losing money. Just like any other business. Here is what an LLC does for YouTubers:
- Limited liability protection
- Giving tax options that would be tax-wisely beneficial
- Better tax return
Limited Liability Protection
When someone forms an LLC it means they are no longer a sole proprietor, and one of the things that it does is separate personal assets from business assets. Personal assets are a house, car, bank accounts, etc. If a YouTuber's YouTube channels get sued because of copyright violation, or influencers say something that might harm someone else's reputation, the other person can sue the YouTuber for a considerable amount of money and go after their personal assets. But with an LLC, they can only go after business assets, and the personal assets are under the liability protection of an LLC.
One example of such lawsuits is the YouTuber Tasha K getting sued by Cardi B for saying she used drugs while being pregnant and had STDs for millions of dollars.
However, for forming an LLC, a business bank account is necessary, and in case of a lawsuit, the plaintiff can go after a business bank account but not any personal bank accounts. Basically, anything that is a part of the business. Some other people work with a team of content creators for their channel, and an LLC is even better in that case, and it protects the owner's personal assets.
A corporation will have the same asset liability protection, so why YouTubers should not become a corporate member instead? The reason LLC for YouTubers is a good idea is because of the benefits it gives the YouTubers by saving money for taxing. As a corporation, shareholders pay taxes two times. One tax is over the corporation's income, and the other one is over their income or salary. If the corporation makes more than its expenses, a percentage of the leftover income goes for taxes, and the same goes for the shareholders. If their salary is more than their personal expenses, some of their income goes for taxes. This is called double taxation or C corp (C corporation.)
An LLC is not like that, and it does not have a double taxation way. Instead, it provides more and better-taxing ways that are far more beneficial for a YouTuber, and it will save them more money.
Along with better taxing, after a year and receiving 1040, the tax return of 1040 is much more generous for an LLC compared to a sole proprietor.
Pass-through taxing means that the tax goes on the personal account of the user. Although the business and the personal are separated, the owner pays the taxes of their business as personal. It is also possible to choose and go for S corp taxing or even C corp taxing. With a YouTube LLC, it is possible to ask the government to tax the business in any of these three ways.
S Corp Taxing
An S corp taxing is similar to the pass-through taxing but is more for the people who make more money and want to save their profits over the year. For a YouTube channel that is rather small, even though it might be with a high income, normal pass-through taxing is better.
Pass-Through, S Crop, or C Corp Taxing
Although pass-through taxing is usually better for YouTubers, YouTube is a place where a lot of unusual things might happen, so it might not be the best for some people. The best way to find out is to start off with pass-through taxing. At its start, a YouTube channel will not have that much income, so it does not matter. After a year of taxing with pass-through, it is possible to change the tax way to any of the other three ways we mentioned.
Then after working a year with each taxing way, there will be some numbers and analyses to make. Consulting them with an expert or an accountant can make the path to the best taxing way for a YouTube business clear.
How Much Forming an LLC for YouTubers Costs
When forming an LLC for YouTubers, a few things will cost a bit of money.
The first thing that some people consider the most expensive part of an LLC is the state fee. The state fee varies from the range of $45 to $500. But remember something, it is not needed to be a resident of a state to form an LLC there. Even people from outside of the US can come to the US, form an LLC, and get back to their country. Here is an image of how much it will cost to form an LLC in each state.
State Annual Fee
One other thing to consider is that some states such as California, have an annual LLC fee tax.  Some states do not have it, but some do, so keep that in mind.
LLC Service Companies
Another part of forming an LLC that costs are paying for the LLC service company to form an LLC. It is highly recommended to use one of these companies, and it will make the process much smoother and easier. Later in this article, there are reviews of three of the top-rated LLC services companies, which cost them ranges from free all the way to $299 for the best of bests.
Steps to Forming an LLC as a YouTuber
- Choosing a state: First off is choosing a state. As mentioned, residency in that state is not needed, but sometimes the business owners might have to travel to that state to do some paperwork. Thanks to the covid pandemic, that can be done partly online.
- Choosing a name for the business: The business name for the LLC has to be unique in that state, and it must not violate copyright. It also cannot be named that address to what the business is such as YouTube LLC.
- Filing an article of organization: These are basically the information and the documents that are needed for forming an LLC.
- Hiring a registered agent: A registered agent is also required for having an LLC. Their job is to control and do all the tax work. Some registered agents are free, but the best registered agents might cost a bit as well.
- Forming an operating agreement: An operating agreement paper is like a guideline for a business that tells who does what and clarifies the roles of each worker. In some states, it does not need one, but in some others, the business owner needs to have one but having it is enough. They are not going to show it anywhere.
Now here are three of the best online incorporation services that can be found for forming an LLC.
Our List of the 3 Best LLC Formation Services for YouTubers
Editor's Choice - Most Value out of Investment — ZenBusiness
ZenBusiness is the editor's choice because not only it has the best service qualities in this list, but it returns the most amount of value to the investor. If a YouTube channel has long-term goals as a business, ZenBusiness is the best one to choose. The customer service is also amazing, and it will be a major help for beginners.
ZenBusiness's plans start at a very cheap price of $49. The most expensive one costs $299 which is still cheaper than a lot of its competitors. One plus that ZenBusiness gives away is its free registered agent for a whole year, and after a year, the cost of a registered agent will be around $100.
When starting, the return value and the customer support of ZenBusiness can be of great help
Most Affordable — IncFile
The cherry on top of IncFile is its price, which is free. It does have some paid plans, but they are really cheap as well, and with choosing IncFile, it will give the most amount of benefit out of the money spent.
This company has more than 15 years of experience and more than 27,000 users, with a lot of great reviews from them. They will also give a registered agent for free for the first year of an LLC business. Forming an LLC with IncFile does not need any amount of money, and except the state fee and its annual fee, it is free, and it will give one of the best services among the LLC company services. However, customer support might not be the best of the best in the least.
Most Beginner-Friendly — NorthWest
With more than 25 years of experience, NorthWest is one of the most experienced LLC service companies available. They also have amazing customer service, which is not a surprise due to the age of their company. Using this company is also fairly easier than the others we had on the list, and it comes with easy packages.
NorthWest also comes with a free year of registered agents, and although the prices are the highest among the three companies, they are still a lot better than some of the other companies out there. It is not as beneficial as IncFile, and it cannot return the amount of value ZenBusiness returns to its customer, but it is still one of the top three choices a YouTuber can make for forming an LLC using a service company.
Is it possible to form an LLC even if there is only one person working on a YouTube channel?
Yes, it is possible. Forming an LLC does not require several people, and anyone can form one even if they work solo, without any other team member or worker.
As a YouTuber, are there any wrongdoing that an LLC will not cover?
Technically no. Anything done, or said in a YouTube video is considered business, and it is not the personal fault of the YouTuber.
In this article, Three of the best service companies for YouTube LLC were introduced. All three of them are amazing for YouTubers, but ZenBusiness is slightly-unnoticeable better because of its return values, and its great customer service that will help beginners a lot. There are some factors mentioned in this article for choosing the best service among the three. It is better not to hesitate and get an LLC as a YouTuber for all the benefits.
In the end, thanks for reading this article. If there is an opinion or question, the comment section is down below, feel free to ask anything you want. Also let us know your thoughts and experience with LLCs as a YouTuber.
Annual fees by state. Retrieved from: https://www.llcuniversity.com/llc-annual-fees-by-state/
Hours of Research