Should I Start an LLC for My Entertainment Business?

Starting a limited liability company (LLC) for your entertainment business can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For an entertainment business, lawsuits can arise from things like slander allegations (e.g., as a result of an offensive performance), as well as from one of your performers getting injured while working and seeking compensation.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your entertainment business seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

An auditorium with a stage set up for a concert

Do I Need an LLC for an Entertainment Business?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should start an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for an Entertainment Business

By starting an LLC for your entertainment business, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Entertainment businesses will benefit from liability protection because of the risks associated with guests visiting their office locations as well as the potential damages that may result from performers and guests visiting private performance venues.

Example 1: While one of your employees is plugging in electrical equipment for a performance on a client’s property, a fire ignites and leads to expensive damages that your business becomes liable for. Your status as an LLC protects your personal assets so they could not be used to pay for the damages.

Example 2: Another agency’s performer trips on stage, becoming injured and unable to perform. They are suing your business, claiming they tripped over equipment left out by your employees. Limited liability as an LLC would protect your personal assets as the owner from being taken in the settlement.

Example 3: A rival business threatens to sue you, claiming your advertisements slander their performers and reputation. As the owner, your personal assets can not be taken in the settlement of the case because of your limited liability status as an LLC.

Example 4: While one of your employees is plugging in electrical equipment for a performance on a client’s property, a fire ignites and leads to expensive damages that your business becomes liable for.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for an Entertainment Business

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if an entertainment business owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

Credibility and Consumer Trust

Entertainment business rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

ZenBusiness

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a dependable LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Do LLCs Need Insurance?

All businesses need insurance because their assets would not be protected without it. LLCs protect personal assets, while business insurance protects business assets.

Entertainment businesses need insurance because of the risks involved with performance. If a performer gets injured or some copyright is infringed upon, insurance can help keep the costs down.

Common Situations Business Insurance May Cover for an Entertainment Business

Example 1: While entering your restroom, a potential client slips and breaks her wrist and elbow. General liability insurance would cover her medical bills related to the accident.

Example 2: After plugging in equipment for a show at a client site, an employee ignites an electrical fire that damages the room and the client’s property. General liability insurance would cover the cost of repairing the customer’s damaged property.

Example 3: A competitor informs you they are suing for libel. General liability insurance would pay your legal fees as well as any damages awarded in a settlement.

Other Types of Coverage Entertainment Businesses Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all entertainment businesses should obtain.

Professional Liability Insurance

If a client decides your services ultimately injured them and files a lawsuit, professional liability insurance would cover your legal fees as well as any damages awarded in a settlement.

Commercial Property Insurance

If you own the building in which you operate, you’re responsible for all business-related property housed there in the event of a fire or other natural disaster. Commercial property insurance would cover the cost of replacing your business equipment and supplies after an accident so you can recover quickly.

Workers' Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover but also any disability benefits stemming from a work-related accident.

Commercial Auto Insurance

Every vehicle you use for business purposes requires commercial auto coverage. If you drive a personal car or truck to and from client sites, your personal auto insurance won’t pay for damages to your vehicle in the event of a work-related accident. Commercial auto insurance protects all vehicles you use on the job in the event of an accident.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance and commercial property insurance.

Read our Business Insurance for Entertainment Companies article for more info.

Entertainers can typically get started without a lot of capital. The main costs will be normal living expenses as they attempt to build a steady clientele. Performers will also need to factor in how much it will cost for them to maintain their equipment.

Entertainment companies will also need to account for travel, equipment maintenance, and employee salaries.

Visit our How to Start an Entertainment Business guide to learn more about the costs of starting and maintaining this business.

The primary ongoing expenses that you’ll need to consider will include travel costs, equipment maintenance and replacement, and employee salaries.

Learn more about running an entertainment business.

Clients are charged an hourly rate or flat performance fee to have a performer at their event.

Learn more about starting an entertainment business.

For occasions where individuals might request performers, entertainment businesses are responsible for providing talent. This can include clowns, magicians, comedians, and other performers.

Whether for a birthday party or corporate event, entertainment businesses typically specialize in a particular area of performance to better cater to a client’s needs.

Entertainment services cost little to run, so you will have the ability to make pure profit. For an individual averaging around 20 performances a week, an entertainment business could make as much as $93,000 a year.

Learn more about running an entertainment business.