If you host and distribute a podcast, you may or may not have considered forming a limited liability company (LLC) for your business. The LLC is a popular option for all sorts of businesses looking for asset protection, and it has a handful of other major advantages as well.
Of course, forming an LLC isn’t the only option for your podcast, so our mission is to help you decide if it’s the best choice for you. There are many different factors to consider when you’re forming a business entity for your podcasting business, so let’s dive into the details of the LLC to figure out if you should form one.
Need Help Starting Your LLC?If you want to make sure your LLC is formed correctly, hire an LLC service. Below are the top two that will take care of all the legal paperwork:
ZenBusiness – $39: If getting the most value out of an LLC service is your priority, choose ZenBusiness. They charge one of the lowest rates online and include all the most important features when starting a business. IncFile – $0: If you're on a strict budget and prefer using the cheapest LLC service, choose IncFile. They will form an LLC for free (plus state filing fee) and give you great features along the way.
What Is an LLC?
First off, let’s quickly outline what an LLC is. LLCs are formal legal entities that are typically taxed similarly to sole proprietorships and general partnerships, in that the owners include any company profits or losses into their personal returns — the LLC itself does not owe income taxes. An LLC may also elect to be taxed like a corporation, although this is not a very common option.
There are similarities to corporations too, especially when it comes to financial responsibilities. In an LLC, the owners or members are not usually personally accountable for the financial status of the business. This means that if someone sues your LLC, your personal assets are not at risk.
Why Starting an LLC for a Podcast Is Important
The top reason to form an LLC for a podcast is to gain access to the personal asset protection provided by this business structure. Whether you distribute a niche podcast with a few dozen listeners or a popular show with thousands of downloads per episode, you need the limited liability protections that an LLC can provide.
As an example, let’s say that you make comments about someone on your show that amount to libel or slander. If you operate your podcast business as a sole proprietorship or general partnership, your personal assets — like your house, car, personal bank accounts, etc. — would be at risk if the person you slandered decides to sue your business.
On the other hand, if you form an LLC for your podcast, and you operate and maintain that LLC in a compliant fashion, the scope of that individual’s lawsuit will be limited to your business assets. In other words, your personal assets will be protected by the business structure you’ve chosen.
Typically, we would say that the LLC’s options for taxation are another major advantage, but that’s not as much the case with podcast businesses. Your podcast’s LLC can be taxed as a sole proprietorship, which is the default option. With this tax structure, your business itself does not pay taxes, but rather the profits are passed through the business entity and you pay taxes on that money when you file your own personal taxes.
You can also choose for your podcast business to be taxed as a C corporation, although this option isn’t very popular because it subjects your business to what’s known as double taxation — meaning that your profits are taxed first on the corporate level and again on the personal level when they’re distributed to you.
The other option is S corporation taxation. There are quite a few limitations to electing S corp taxation, but most U.S.-based podcasts have no trouble meeting these requirements — your business cannot have more than 100 owners, they all must be either residents or citizens of the United States, etc.
In theory, S corp taxation can help your podcast business save money by reducing your self-employment tax burden. Instead of paying self-employment taxes (a 15.3% tax that includes the employer and employee portions of Medicare and Social Security) on all of your business income, you can pay yourself a reasonable salary for your role and only pay self-employment tax on that portion of your income, while you can reinvest the rest of it into your business without paying this tax.
The problem with electing S corp taxation for podcasters is that you simply don’t have many business expenses to invest that extra money into. Therefore, the IRS might (rightfully) have some questions if it sees you leaving lots of money in your business structure.
Finally, an LLC structure can enhance the credibility of your podcast business venture. Informal business entities don’t have exclusive assumed business names and typically operate under the personal name(s) of their owner(s). For instance, if your name is Johnny Smith and you operate a podcast, your company’s name is also “Johnny Smith,” which obviously isn’t a great name for any business.
In this scenario, you could register a DBA (doing business as) name to give your business the ability to operate under an assumed business name, but DBAs have no exclusivity regarding their naming rights. This means that if another podcaster wants to use your DBA name as their own, they’re not only allowed to do so, but they can actually register a formal business entity with that name, preventing you from continuing to use your own assumed name.
With an LLC, you not only have the rights to exclusive use of a business name, but you will also have either the phrase “limited liability company” or the letters “LLC” in that business name. This provides your business with a jolt of respectability because sponsors respect the professionalism displayed by an LLC. Also, your sponsors typically feel more comfortable writing checks to a business entity rather than to an individual.
How to Start an LLC for a Podcaster
The formation process for LLCs varies depending on which state you’re forming one in, but in general, the process has some universal steps that need to be taken no matter what state your business is located in. If you want a comprehensive overview of all the steps required to form an LLC, check out our complete guide on the topic. The basic steps in the LLC formation process in any state are as follows:
The 3 Best LLC Websites
When forming an LLC for your business, you generally have three main options. You can form your own LLC using the DIY method, you can hire an attorney, or you can hire an online business formation service.
The DIY route can require quite a bit of effort, and if you’re not comfortable with the process, it can cause some undue stress. As for hiring a lawyer, many startups can’t afford to spend the thousands of dollars it can cost for an attorney to form your business entity.
This leads us to the third option, hiring an online LLC service. There are dozens of reputable companies offering this service these days, and they can all save you a tremendous amount of money compared to an attorney. In addition, while these companies may not have as much expertise as an attorney does, they still provide a considerable amount of peace of mind compared to the DIY route.
If you want to take a look at the top options for online business formation services, head on over to our guide to the seven best LLC formation services available. In addition, we’ll briefly break down our top three options on this page. These are, in our opinion, the best options for business formation service:
🥇 ZenBusiness – Best Overall Value
ZenBusiness truly has it all. They provide complete LLC formation service along with a full year of registered agent service for one incredibly low rate, and they also have stellar customer feedback. It’s the best LLC service online.
IncFile – Cheapest LLC Service
IncFile has a business formation package that is free of charge, as long as you pay your own state fee. That’s obviously an enticing offer, especially when you consider that they also provide a year of registered agent. Throw in their strong customer feedback, and IncFile is an excellent choice for LLC formations.
Northwest – Premium Support
Northwest is a bit more expensive, but their industry-best registered agent service includes local scanning of every document they receive on your behalf. They also have the best customer support for LLC services. If you’re looking for a premium service, Northwest is excellent.
Additional Resources for Starting a Podcast
- Podcast Insights: Podcast Insights provides podcasters with tools and resources to help you “start, grow, and monetize your podcast.” They have articles to help you determine which podcast hosting platform you want to use, what recording gear to purchase, how to register a domain name for your podcast, and much more.
- The Podcast Host: The Podcast Host is a wide-ranging resource for podcasters of any experience level. They have information regarding planning your podcast, including equipment recommendations and publishing insights, and they also have plenty of resources for expanding and monetizing your podcast as well.
- BuzzSprout: If you’re looking for podcast hosting, give BuzzSprout a long look. To date, they’ve helped more than 100,000 podcasts get off the ground, and they also offer resources for promoting your podcast, as well as tracking its success. We’re also big fans of their “31 of the Best Podcasting Resources” article, which is stuffed with valuable tools for podcasters.
- “How to Start a Podcast in 2020” from Smart Passive Income: In this guide, Pat Flynn — the host of the popular Smart Passive Income podcast — lays out his step-by-step tutorial to help you take your podcast from concept to reality. Flynn updates this tutorial every few months, and it currently includes 15 chapters, ranging from why you should start a podcast through how to effectively monetize it.
- Yaro Starak: Yaro Starak has been a significant figure in the podcasting world since 2005. While his site does include some resources for the basics of starting a podcast, we find his information to be especially valuable when he talks about next-level aspects like how to best monetize your podcast and how to evaluate your podcast metrics.