Financial Benefits of an LLC for Your Video Production CompanyWhen you launch a video production company, focusing on business development or perhaps developing a signature aesthetic is natural. Legal and financial concerns are comparatively less exciting, yet they are essential for ensuring your business is set up for lasting success.One of the most important things you can do to help your video production company thrive is to select the proper legal structure to yield significant financial advantages. While no one-size-fits-all solution exists, many video production companies benefit from the LLC structure. What is an LLC?The LLC, or Limited Liability Company, is a legal structure that allows you to shield your assets from litigation or creditors. It is similar in some ways to a Corporation but generally offers more flexibility and lighter regulatory burdens. Registering your business as an LLC enables you to establish it as a distinct legal entity. In other words, your business stands apart from its owner. This is a big part of what makes the LLC structure so beneficial legally and financially. What are the Financial Perks of the LLC?Indeed, forming an LLC for your video production company can provide several financial advantages. Tax BenefitsOne of the most significant financial advantages has to do with taxation. Comparing LLCs with corporations helps us understand what gives LLCs an edge. If you choose to make your video production company a Corporation, you'll automatically be taxed on a corporate basis, which means you pay taxes on your business tax return. Then, shareholders must pay additional taxes on their share of the profits. This is often called "double taxation" for obvious reasons. Not so with an LLC. LLCs can be taxed pass-through, so you do not have to file a business tax return. Instead, the LLC's members declare their share of the profits or losses on their tax return and then pay their average tax rate. The "double taxation" problem is avoided. Also note that should you determine that it makes more sense to be taxed corporately, that's always an option. LLC members have much control over how they wish to report to the IRS. Be aware that you may be responsible for some self-employment taxes, such as Social Security taxes, but there are ways to offset and mitigate some of these tax burdens. Personal Wealth ProtectionAnother potential financial advantage: Running an LLC keeps your assets safe from lawsuits or aggressive creditors. That's because the LLC format lets you keep your business assets and liabilities separate from your liabilities. So, if your video production is named in a lawsuit, you don't have to worry about your personal savings account, home, or family car being taken. As such, you can invest freely and confidently in your business, managing and mediating personal risk. Note: To take advantage of these protections, it's critical to create a business bank account that isn't tied to personal banking or checking accounts. It's also essential to follow this basic rule of thumb: Never use personal assets to pay business liabilities, and never use business assets to pay personal liabilities. Additional Financial PerksA few additional financial advantages that LLC members can expect: Low-cost setup: Compared with the costs associated with forming a Corporation, registering as an LLC is inexpensive. Multiple management options: From self-management to third-party management, you'll have plenty of flexibility to choose the operational model that makes the most financial sense. Business loan options: The LLC format confers professional credibility on your business, making securing a business loan or a line of credit easier. This can help you maintain a healthy cash flow or make strategic investments. Registering Your Video Production Company as an LLCYou'll need to complete just a few procedural steps to take advantage of these financial perks. Choose the State Where You Want to RegisterGenerally, you'll want to register in the state where you're headquartered, which simplifies your tax obligations. So, if you're in Los Angeles, you must register for an LLC in California. Appoint a Registered AgentEvery LLC must have a Registered Agent to receive legal and tax documents on your business's behalf. Your Agent must have a physical mailing address in the state where you are registered. Note: The typical cost for hiring a Registered Agent is under $100 annually, which is usually not a significant expense. File Articles of OrganizationYou'll need to file the Articles of Organization with your state and pay the nominal registration fee, which may be anywhere from $20 to $300, depending on your state. Create an Operating AgreementAn Operating Agreement is a blueprint or charter for your video production business. Although it is not legally mandatory, having one can help you avoid long-term friction or conflict with your partners. Claim an EINYou must have an Employer Identification Number before you process payroll or pay your taxes. You can get one for free from the IRS. Consider the Financial Perks of the LLCAs you position your video production company for long-lasting success, it's essential to be strategic about your legal structure. The LLC format is the most beneficial in many respects, offering a range of critical financial perks. Consider registering your business as an LLC and claim these financial advantages as your own! Author BioAmanda E. Clark is a contributing writer to LLC University. She has appeared as a subject matter expert on panels about content and social media marketing and also writes prolifically about topics related to small business ownership. | Use our online video maker to create a marketing video Choose a template and edit it with our online video editor Video Categories Latest Articles |