Thinking about forming an LLC for your podcast? This goal of this post is to help determine whether or not forming this business entity is worth it for your situation.
For background, I’m a podcaster with more than 100 published shows you can check out here. I understand what it takes to operate a podcast and everything that goes into this business from nitty gritty of editing audio, booking guests, conducting interviews, and uploading files. I’ve been building my little media business for years and plan to continue growing my audience for years so an LLC makes sense for me.
But who cares about me, right? You want to know whether or not forming an LLC is right for your podcast.
In general, if you podcast is making money and something you plan to grow further then forming an LLC is a good idea to protect yourself in my humble opinion. Everyone’s financial situation is a little different, but CPA’s have told me if you don’t make $50,000 in revenue per year from your podcast then forming this entity won’t benefit you from a tax perspective.
Keep that $50,000 threshold in mind if your main goal is to save on taxes. There are other benefits beyond potential tax savings that I cover below, but I wanted to be clear on this point since tax savings is the main some podcasters explore the LLC option.
- Form an LLC for a Podcast with ZenBusiness ($39 + State Fees)
If you are doing this for fun, don’t plan to turn this into a business, or no one listens then you’re safe keeping this as a hobby. Still with me? Wonderful! Next up, I share more advantages, disadvantages you’ll want to know, and how to setup an LLC for a podcast.
Advantages of an LLC for Podcasters
The advantages of an LLC for podcasting include personal liability protection, tax benefits and personal liability protection with this business. Let’s dig into each specific benefit.
Personal Liability Protection
The protection of personal liability is the most significant advantage in forming an LLC for podcasters. This profession requires liability protection due to the possibility of lawsuits based on libel or slander, whether the podcaster has a popular show with thousands of listeners or a niche audience of only a few dozen listeners. Assume for this example that you make remarks about someone on your show that causes them to file a lawsuit. Your personal assets wouldn’t be at risk from this suit, unlike other business structures, such as a general partnership or sole proprietorship.
An LLC’s taxation is a major advantage for any businesses with sufficient revenue. The default option for an LLC is to tax it as a sole proprietorship, meaning that the business itself doesn’t pay taxes. Instead, profits and losses pass through the LLC, and owners pay taxes on this revenue as personal income.
Personal Privacy Protection
A podcasting business is very public by nature, so podcasters typically need to protect their personal privacy. The last thing you want is a super fan to find your address and show on your doorstep. Awkward is an understatement!
The states of Delaware and Nevada are particularly attractive for privacy as LLC owners are completely anonymous in these states. This strategy requires the podcaster to avoid using their real name or providing any other identifying information on their shows to help ensure the most privacy possible. I.e. Don’t give away your cell phone number or personal address on the show.
Disadvantages of LLC for Podcasters
An LLC requires money to create and maintain, in addition to a limited amount of effort on the part of the owner. These costs probably won’t be worthwhile if the podcasting business doesn’t actually generate revenue and is currently a hobby.
Many podcasters aren’t primarily motivated and don’t even bother monetizing the show. Furthermore, a new show is unlikely to generate revenue in the first 6 months… Ask me how I know!
How to Start an LLC as a Podcaster
In general A podcaster uploads audio files that the public can listen to often on a subscription basis. They typically generate revenue for their creator through advertisements, although podcasters may also charge listeners a fee in exchange for accessing to audio content. An LLC is a common business structure for podcasters since it protects the owner’s assets in addition to other benefits.
The specific process for forming an LLC depends on your state. However, it generally includes the following steps:
- Choosing a name for the LLC
- Filing the Articles of Organization
- Choosing a registered agent
- Creating an operating agreement
1. Choose a name for your podcasting LLC.
Choosing a name for your LLC may seem like an easy step, but it’s actually one of the most challenging. A number of laws regulate this process, so the wrong choice can cause your LLC application to be rejected. These laws are fairly similar between states, although there are some differences.
The most important requirement is that the name of your LLC must be unique for your state. Many states also have laws that prevent an LLC’s name from being too similar to an existing one, even when the names aren’t identical. Furthermore, the name can’t infringe on any copyrights, which you can determine by performing a search of eligible business names in your state. In some cases, you won’t be able to use the name you want or any variation on it.
An LLC’s name must include the phrase “limited liability company” or the initials “LLC”. In addition, the name can’t imply some other business structure. For example, you can’t include the words “corporation” or “incorporated”, or any abbreviations for these words.
Finally, the name can’t refer to specific types of businesses if your LLC isn’t one of those businesses. For example, you wouldn’t be able to include the word “bank” in the name of your podcasting LLC. Similarly, you couldn’t use words like “hospital” or “lawyer”.
2. File the Articles of Organization
The process for filing the Articles of Organization includes gathering the required information, submitting it and paying the filing fees.
Each state has its own form for creating Articles of Organization for your LLC. Furthermore, the information these forms require can be quite unique, although they generally include the following:
- Name of your LLC
- LLC’s physical address
- Name and location of your registered agent
- Names of your LLC’s owners and members
- Name of your LLC’s organizer
- Name of your LLC’s manager
Business owners often hand their Articles of Organization to their business lawyer, who should have detailed knowledge of the procedures for submitting this document in their state. Another option is to use an LLC formation service, which can also handle other business requirements like annual reports and franchise taxes. This choice is popular for entrepreneurs like podcasters because it costs much less than an attorney.
Each state sets its own filing fee for Articles of Organization. This fee can vary dramatically between states, ranging from $50-$500.
3. Choose a registered agent.
A registered agent service is a point of contact for all legal matters regarding your business and is essential for any business, based in the United States. This legal entity receives business documents from your state government and forwards them to you. These documents include notifications of lawsuits, compliance filing reminders, service of process and tax forms, which are critical and often time sensitive.
The primary purpose of a registered agent is to ensure that you receive documents in a timely manner. Otherwise, you might not know about a lawsuit against your LLC until after the proceedings, depriving you of the opportunity to defend it. Likewise, missing a filing deadline can have serious financial, legal consequences for your LLC. Common choices for your LLC’s registered agent include the business owner, attorney or accountant, or a professional registered agent service.
Using yourself as the registered agent for your LLC isn’t the best option, although it does have advantages like saving money by not paying someone to do it for you. However, this option restricts you to only doing business in your state of residence since you need a separate, registered agent for each state. Furthermore, a registered agent must always be available during business hours, which would prevent you from taking vacations are sick days.
Using a lawyer or accountant as your registered agent can be a good option, especially if you already have on retainer. However, these professionals usually charge high rates for these services if you hire them for that particular purpose and may not have much experience serving as a registered agent. This option also restricts your business to states where your lawyer or accountant holds an office.
A registered agent service will typically be the best option for small businesses like podcasting. These services usually have offices in all 50 states, so it won’t hamper your plans for expansion. A registered agent service typically specializes in this service, so it won’t be a secondary business the way it would for an attorney or accountant. Many of these services exist, so it’s important to read reviews to determine the best one for your podcasting business.
4. Create an LLC operating agreement for podcasting.
An operating agreement defines how the LLC will be run. It acts as the LLC’s bylaws by establishing a frame of rules and regulations. The operating agreement also details the structures of the LLC’s ownership and management, ensuring that business and government entities recognize the LLC’s legitimacy. The primary advantage of an operating agreement is that it avoids leaving critical aspects of the LLC open to interpretation. Key elements of an operating agreement for an LLC include the following:
- Identifying Information
- Statement of intent
- Business Purpose
- Tax Treatment
- Admission of New Members
Identifying information includes the LLC’s name, along with the addresses of its principal business office and initial registered office.
A statement of intent affirms that the operating agreement is in accordance with state law. It also indicates that the business will come into existence when the required documentation has been filed with the state.
The business purpose should describe the nature of the business and also include a statement like “and for any other lawful business purpose,” which allows you to change your business later.
Related Reading: Starting an LLC for a YouTube Channel (Unbiased Guide)
The term typically indicates that the LLC will continue operating as described elsewhere in the operating agreement until it’s dissolved according to state law. However, an LLC formed for specific purpose may dissolve automatically once specific conditions are met.
Tax treatment indicates whether the LLC will be taxed as a sole proprietorship, partnership or corporation.
The new members element describes the procedure for someone acquiring an interest in the LLC. You may need to prepare a new operating agreement to add a partner if the current agreement has no such provision.
Surprisingly, the only states that require you to file the LLC operating agreement are California, Delaware, Maine, Missouri and New York. Furthermore, only New York requires written documentation, as the other four will accept oral agreements. However, maintaining a written operating agreement is highly recommended, whether it’s a legal requirement in your state or not. This step can save you a great deal of trouble in the future.
Arizona, Nebraska and New York are the only states that require you to publish a notice in the newspaper announcing the creation of your LLC.
The Arizona Corporation Commission (AZCC) will send you a Notice for Publication after it approves your LLC in that state. Section 29-3201 of the Arizona Revised Statutes requires a notice of an LLC’s formation to be published in a newspaper for three consecutive runs, which typically means one ad per week for three consecutive weeks. The newspaper will send you an Affidavit of Publication once your ad run has completed. You should then file this affidavit with the AZCC, although it’s not legally required.
Nebraska Revised Statute 21-193 requires LLC’s formed in Nebraska to publish a Notice of Organization in newspaper with general circulation near the LLC’s designated office address. This statute doesn’t define the meaning of the word “near”, but you should use a newspaper in the same county as the LLC. The ad with the Notice of Organization must run for three weeks, after which the newspaper will mail you an Affidavit of Publication. Mail a copy of the affidavit to the Nebraska Secretary of State and keep the original for your records.
Form an LLC for a Podcast with ZenBusiness ($39 + State Fees)
Section 206 of the New York LLC Act governs the requirement for LLC publication in that state. LLC’s formed in New York must publish notice of their formation in two newspapers, such that one publication has a daily circulation and the other has a weekly circulation. The County Clerk for the LLC’s county must approve both publications. The ads must run for six consecutive weeks, after which the newspapers will mail you affidavits of publication.
How much does an LLC cost for podcasting?
ZenBusiness’s LLC services starts at $39, which is an extremely low rate. This service package also includes registered agent services for one year. The IncFile business formation package is free of charge, although you still need to pay the state filing fee. Northwest charges $225 for its LLC filing services, but it also includes registered agent services that perform local scanning of the documents they receive on your behalf.
Licenses, Permits and Protection
Additional fees related to forming an LLC include at life using fees, trademark and copyright protection, and sublicensing fees.
State and Local Business Licensing Fees
A podcasting business may require additional licenses and permits depending on the state. Most businesses must collect sales tax on the goods and services they provide, which can include taxes for the state, city and county.
Trademark and Copyright Protection
Podcasters may also need to protect their rights by registering the appropriate trademarks and copyrights, especially if they’re developing a unique concept, brand or design. The legal requirements for online businesses like podcasting are evolving quickly, especially with respect to copyright laws.
Podcaster’s often want to use an idea that’s owned by another business entity. They can often negotiate a sublicense with the copyright owner, typically in exchange for a royalty or fixed fee. It’s never a good idea for a podcaster to use content without authorization from the rights holder, even when it seems unlikely to result in a lawsuit.
Frequently Asked Questions
Is LLC a good option for podcasting?
An LLC is often a good business structure for podcasting because it allows the owner to separate business expenses from personal expenses. It provides the owner with an Employer Identification Number (VIN), allowing the owner to create a bank account for the podcast. This step is essential for separating expenses if the podcast ever starts earning significant revenue.
What are the disadvantages of LLC for podcasting?
The biggest advantage of using an LLC for podcasting is that it has more administrative requirements than a sole proprietorship or limited partnership. A formal agreement is necessary for an LLC because relatively little legislation exists for operating a business with the structure in comparison to the many statutory requirements for corporations. Furthermore, an LLC can only receive two of the following benefits for a corporation:
- Flexible asset transfer
- Liability limited by business assets
- Centralized management structure
- Business remains in existence if a shareholder leaves
Do you need an LLC for podcasting?
The need for a podcaster to form an LLC primarily depends on the purpose of podcasting. An LLC may be unnecessary if its primary purpose is to support an existing business, as any liability that the podcasting creates would fall under the umbrella of the main business. An LLC is also unlikely to be necessary if the podcasting doesn’t generate much revenue.
However, the tax advantages of an LLC may be worth the cost if the show is monetized through advertising or products.
How do podcasts generate revenue?
Podcasts make money in the same way as blogs, social media influencers, or even talk radio programs make money. The big one of course is through advertising.
As the host of a podcast, you will be asked to provide voice overs during your show to promote a product or service. If you’re running a food business podcast like I do, I’ve had sponsors like payroll service companies and food truck manufacturers on the program. If you’re a personal finance guru, you’ll have plenty of potential sponsorship opportunities like banks or credit card companies.
Another key revenue source for podcasters is either creating a premium community or creating a digital product or class of some sort. I personally subscribe to a stock investing membership that charges $200 per year where the head investor records a weekly podcast discussing the specific companies that I should buy, sell, or hold onto each week. This podcaster has a few thousands annual subscribers so the numbers can quickly add up if you’re able to convert free listeners into paid members.
Keep in mind that a podcast is a platform that can be used to help grow any sort of business. You could use it sell consulting services or any number of products you want to create. If you’re able to build a loyal audience, the opportunities to generate income become almost limitless.
Podcasting Sole Proprietorship vs. LLC
A sole proprietorship is a legal extension of yourself, meaning that there is no legal difference between yourself and the business. An LLC legally separate yourself from your business, which becomes advantageous if someone decides to sue your business for something you say in a podcast.
Podcasting LLC vs. Corporation
The best strategy for podcasters is to form an LLC once their business starts earning revenue. However, they may want to switch to an S-style corporation once the business grows beyond the startup stage.
What is an LLC?
A limited liability company (LLC) is a formal legal entity, but it’s typically taxed in the same way as general partnerships and sole proprietorships. Owners include company profits or losses in their personal tax returns, but the LLC itself doesn’t owe income taxes.
An LLC can be taxed like a corporation, although this option is rare. It also has similarities to corporations, especially with respect to financial responsibilities. For example, LLC owners usually aren’t personally liable for a business’s financial obligations, meaning that your personal assets aren’t at risk if someone sues your LLC.
How do I form my LLC?
Click here to start the LLC formation process with Swyft Filings. It took me about 30 minutes to complete the filing process with this service. You can also form an LLC for a podcast with ZenBusiness for $39 + State Fees.