You create content because you’re passionate about your topic and your audience. But it’s more than just a hobby. It generates revenue, has expenses, and pays salaries.
As a creator, it’s important to treat your content like a business. That means establishing a legal business entity, setting a budget, and paying taxes. In this guide, we help you understand the business of podcasting and content creation, and how to get started.
Note
Important note: We are NOT attorneys or tax professionals. This should not be considered legal or tax advice for your specific circumstance. It’s important to consult a qualified professional before making any decisions.
Why Create a Business Entity for Your Podcast?
The purpose of a business entity for a podcast or content creation business is to establish a legal and organizational structure to conduct business activities.
Basically, a business entity is a legal party that exists separate from yourself. The entity can make purchases, sign agreements, hire a team, own property (physical and intellectual). It can even be sold.
Do you need a business entity? No. In fact, we recommend that you start generating content without one. Get yourself into the groove of producing content regularly and building an audience before you start jumping through legal hoops.
But eventually, a business entity becomes enticing because of these benefits:
- Liability protection: A business entity usually provides limited protection, meaning that the owners’ personal assets are generally protected from business debts and liabilities. In the event of legal issues or financial obligations, creditors typically cannot go after the owners’ personal assets.
- Professionalism and credibility: Forming a business entity demonstrates to potential sponsors, advertisers, and guests that the podcast is a serious venture and operates under a structured framework.
- Tax advantages: Depending on the jurisdiction and the chosen entity type, there can be tax advantages associated with operating a podcast as a business entity. It allows for potential tax deductions related to business expenses, equipment, marketing, and other relevant costs.
- Brand protection: Business entities help protect the brand name, logo, and other intellectual property. Registering trademarks and copyrights can safeguard your content business’ unique identity.
- Partnerships and funding: A business entity provides a formal framework to manage partnerships and equity arrangements. It also facilitates raising funds, entering into sponsorship agreements, or attracting investors who may be more inclined to support a structured business venture.
- Long-term planning: By creating a business entity, owners can establish a clear structure for the future growth and expansion of their podcast. It allows for easier succession planning, bringing in new partners, or even selling the podcast as a valuable asset.
What Type of Business Entity Should You Create?
This is a tough question. There are countless different types of business entities all over the world. We couldn’t possibly describe them all.
The specific legal requirements, tax implications, and recommended entity type may vary depending on the jurisdiction where you operate. Seeking guidance from an attorney or business advisor is best to make sure you are compliant with local laws.
That said, we can offer some things to think about when you choose a business entity.
Liability protection
Your content is unlikely to hurt someone, but there’s always the chance, especially if you’re giving out health or medical information. If someone gets hurt trying to implement one of your recommendations, they might have a valid lawsuit claim.
One of the primary factors is the level of personal liability protection you desire. Entities like limited liability companies (LLCs) and corporations provide a separation between personal and business liabilities, shielding your personal assets from business debts and legal issues.
Ownership and management structure
Consider how you want to structure ownership and management within your business. Different entities have varying options for ownership, such as single-owner LLCs, partnerships, or corporations with shareholders and directors. Determine the roles and responsibilities of individuals involved in your business to choose the appropriate structure.
Tax implications
Taxation is an important aspect to evaluate. Different entities have different tax treatments. For instance, some are taxed based on the individual tax rates of the owners while others face corporate taxes. Even how you report your taxes can change depending on the entity.
Tax law can be exceedingly complex, so it’s always a good idea to consult with a tax professional before you make any decisions. In fact, it’s almost always best to Outsource your tax matters to an expert.
Administrative requirements
Understand the administrative obligations and formalities associated with each entity. Some entities, like corporations, may require more formalities such as holding annual meetings, maintaining corporate records, and filing regular reports. LLCs generally have fewer administrative requirements. Consider the level of administrative burden you are comfortable with when selecting an entity.
Funding and growth potential
Consider how you plan to fund your business and its growth prospects. If you anticipate seeking external funding from investors, a corporate structure may be more suitable as it allows for the issuance of shares. Entities like LLCs may have limitations in attracting investors or issuing stock. Also, consider whether the entity allows for easy addition or removal of partners or shareholders in case of future changes.
Industry and professional requirements
Some industries may have specific legal entity requirements or regulations. For example, certain professions like law firms or medical practices may need to operate as specific types of entities. Research any industry-specific regulations or licensing requirements that may impact your choice of entity.
Future exit strategy
At some point, you may want to sell your business, merge with someone else, or pass it on to a successor. If you think that describes your goals, choose the business structure that allows for that kind of transfer. Certain entities may offer more flexibility and attractiveness to potential buyers or merger partners.
Business Entity Types in the United States
In the United States, there are several types of business entities, each with its own characteristics and legal implications. Here are the main types:
- Sole Proprietorship: A sole proprietorship is the simplest and most common business entity. It is owned and operated by a single individual. From a legal perspective, the owner and the business are considered the same entity. While it’s easy to set up and offers complete control to the owner, there is no legal separation between personal and business liabilities, making the owner personally liable for business debts.
- Partnership: A partnership is formed when two or more individuals join together to carry on a business for profit. There are two primary types of partnerships: general partnerships and limited partnerships. In a general partnership, all partners have equal responsibility and liability. In a limited partnership, there are general partners who manage the business and have unlimited liability, and limited partners who invest capital but have limited liability.
- Corporation: A corporation is a separate legal entity from its owners (shareholders). Corporations provide limited liability protection to their shareholders, meaning the owners’ personal assets are generally protected from business debts and liabilities. Corporations have a formal structure with shareholders, directors, and officers. They also have more complex governance and reporting requirements than other entity types.
- Limited Liability Company (LLC): An LLC is a flexible business entity that combines certain features of partnerships and corporations. It provides limited liability protection to its members (owners) while allowing for pass-through taxation. LLCs offer more flexibility in terms of management and structure compared to corporations. They are relatively easy to form and maintain, making them a popular choice for small businesses.
- S Corporation: An S Corporation is a regular corporation that has elected a special tax status with the Internal Revenue Service (IRS). It allows for pass-through taxation, meaning that the business’s income or loss is reported on the individual shareholders’ tax returns. S Corporations have restrictions on the number and type of shareholders and require adherence to certain IRS guidelines.
Establishing a Business Budget
Creating content like a business means using a thoughtfully-created budget. A budget ensures that you’re smart about your spending. This keeps your business afloat and helps you produce the best content possible.
You’ll need some cash upfront to buy the right equipment. Don’t worry, you don’t need much. We explain everything in our complete equipment guide. You should also check out some of these articles for more equipment recommendations:
- The best podcasting microphones, lavalier microphones, and DSLR microphones.
- How to create a DIY podcasting studio.
- Everything you need in your live streaming setup.
- Our picks for audio recording equipment.
- The best cameras for podcasting and content creation.
Next, consider how much it will cost to produce each episode. Does your content have any expenses? For instance, if you comment on sports news, you may need to buy licenses to use the audio of a broadcast.
If you intend to hire people to help you create content, you’ll need to understand how you will pay them. In the early stages of your business, you’ll probably pay them a portion of profit.
You’ll also need to consider how much you’ll spend per episode to promote your show. Will you buy ads? Pay for sponsorships? You might hire a VA to spend a few hours emailing influential people or designing artwork.
Create a reasonable budget and stick to it. This is an important part of being consistent. If you spend cash quickly, you might run out of money before you build a reliable audience.
Paying Taxes as a Content Creator
Taxes are a big topic. Before we offer some advice, let us again be clear that we aren’t attorneys or tax specialists. We are not giving you specific advice, just helping you understand the tax environment. You should always consult a professional who understands your jurisdiction.
How much do content creators pay in taxes?
The amount of taxes content creators pay varies based on factors such as location, income level, and business structure. Content creators typically pay self-employment taxes in their jurisdiction, rather than paying through an employer. It’s important for content creators to consult with tax professionals to understand their specific tax obligations and take advantage of any available deductions.
If you weren’t clear about how much you can expect to pay in taxes, a good idea is to consult another creator who lives in the same area as you. Ask how much they pay in taxes, how much revenue they bring in, and how much they deduct as expenses.
Do content creators pay taxes?
Yes. Whether you’re a podcaster, social media influencer, blogger, newsletter author, or any other type of creator, you have to pay taxes on income in most jurisdictions.
Depending on your jurisdiction, it may be your responsibility to report this income. In the United States, for instance, anyone who pays you will send a tax from 1099-NEC if they pay you more than $600, but you are still required to self-report all income, even if you don’t receive a form.
Do content creators pay taxes on gifts?
In most places, gifts are considered income if you are expected to provide a service in return. For instance, if you receive a free product in exchange for a review, the product is part of your income. If you aren’t required to provide a service, it’s just a simple gift.
There are lots of exceptions to this rule, depending on your location, so make sure to check with local laws.
What expenses can creators deduct from their taxes?
This depends entirely on your jurisdiction, but generally speaking, you can deduct any ordinary expenses for running the business. This includes the cost of any goods, equipment, licenses, software tools (like podcast hosting), marketing expenses, insurance, and more.
Be careful about what you claim as an expense. Deductions must relate to your show. If you try to squeeze in an unrelated expense, you risk getting in trouble with your tax authority.
In many cases, you can also deduct the portion of your home that serves as a podcast studio, including your rent/mortgage, utility expenses, and upgrades.
What happens if the business reports a loss?
Sometimes, you may have a year where your business costs more than it earns. This is quite common during the early years, in fact. If you spend more than you make, you won’t have any tax liability. In some cases, you can carry those losses over several years until it balances out.
If your business continues to lose money every year, some jurisdictions (including the U.S.) will classify it as a hobby project. In this case, you won’t be able to claim business deductions.
When do content creators pay taxes?
At the same time as everyone else, though it depends on your jurisdiction’s tax schedule. Many places require you to make estimated tax payments throughout the year. In the U.S., failing to make estimated payments results in a fine. The fine isn’t big, but there’s no need to pay it if you plan ahead.
More Questions About the Business of Podcasting and Content Creation
Here are some more common questions people ask about starting their own podcast or other content creation business.
Does a podcast count as a business?
Yes, a podcast can be considered a business. While not all podcasts are run as businesses, many podcasters treat their podcasts as commercial ventures. If you monetize your podcast through advertising, sponsorships, merchandise sales, or other revenue streams, it’s a business.
Running your show (or any content-based endeavor) like a business is smart because most jurisdictions allow businesses to write off expenses. You can often carry those expenses across several years, which means this year’s expenses can reduce your tax liability in a future year.
However, operating as a business means you have to comply with the laws and regulations of your jurisdiction. There are laws that govern copyrights, taxes, recordkeeping, and more.
However, it is worth noting that some podcasts may be purely personal or hobby-oriented without the intention of generating profit, in which case they may not be considered as businesses in a strict sense.
Do you need an LLC for a podcast or content creation business?
No, you do not necessarily need an LLC for a podcast. The choice of whether to form an LLC or any other legal entity for a podcast depends on various factors. While an LLC can provide liability protection and other benefits, it may not be essential for every podcast.
If you are operating a small podcast as a solo venture and do not anticipate significant risks or legal issues, you may choose to operate as a sole proprietorship without forming a separate legal entity.
However, if you want personal liability protection, professionalism, or plan to engage in commercial activities, it’s a good idea to form an LLC or another suitable legal entity. Just make sure you research and understand the legal and financial implications based on your specific circumstances. It’s always a good idea to consult with an attorney or advisor.
Should I trademark my podcast name?
Trademarking your podcast name depends on your specific circumstances. While trademark registration offers legal protection and brand recognition, it may not be necessary for every podcast. Consider factors such as your future plans for expansion, brand recognition, and potential risks of others using a similar name.
If you aim to establish a strong brand, monetize through sponsorships or licensing, or prevent others from using a similar name, trademark registration could be beneficial. However, it involves costs and administrative work. We recommend consulting with a trademark attorney for personalized advice.
Do podcasts and content creators pay taxes?
Yes, podcasts are typically subject to taxes. The specific tax obligations vary depending on factors such as the country, state, or region where the podcast operates, as well as the revenue generated from the podcast.
Podcasters may be required to pay income taxes on any profits earned from advertising, sponsorships, merchandise sales, or other sources. Additionally, there may be other tax obligations such as sales tax, depending on the nature of the podcast’s activities and applicable laws. Consult with a tax professional or accountant who can provide specific guidance.
Can I be sued for my content?
Yes, it is possible to be sued for the content you create. As a creator, you have a responsibility to ensure that your content does not violate any laws, infringe on intellectual property rights, defame individuals, or cause harm in any way.
If your podcast contains defamatory statements, copyright infringement, privacy violations, or other actionable content, you could face legal consequences. It is crucial to exercise caution, conduct thorough research, obtain necessary permissions, and consider obtaining liability insurance to mitigate the risk of potential lawsuits.
Do I need a license to have a podcast or other content business?
In most cases, you do not need a specific license to create content. However, it is important to consider other legal requirements that may apply. For example, if you plan to use copyrighted material in your podcast, such as music or excerpts from other shows, you may need to obtain appropriate licenses or permissions.
Additionally, depending on your jurisdiction, there may be regulations or licenses required for certain types of content. It is essential that you research and comply with any applicable laws and regulations based on your specific circumstances and location.
Always Consult an Expert
Remember, it is advisable to consult with an attorney, accountant, or business advisor to fully understand the legal and financial implications of starting a business in your area. It’s better to spend a few dollars gettin the advice of an expert than losing everything because you made a bad decision.
