Do I Need an LLC for My Instagram Business?
Starting a limited liability company (LLC) for your Instagram 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 Instagram business, lawsuits can arise from things like accidentally including confidential details of another public figure in a post or posting a copyrighted image with the appropriate license to do so.
LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your Instagram business seem more credible.
Interested in getting started? More than 84% of our readers form their LLC through a specialized LLC formation service in order to save time and avoid potential penalties.
Tailor Brands ($0 + State Fees)
Should I Start an LLC for My Instagram 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 Instagram Business
By starting an LLC for your Instagram 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 personal liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your Instagram business is sued or if it defaults on a debt.
Many Instagram businesses will benefit from liability protection—especially when selling goods and services. Data breaches, breach of contract, copyright infringement, and intellectual property disputes are other common issues.
Example 1: You refuse to pay for a promotional video that does not conform to your specifications. The video creator lodges a claim in civil court. Regardless of the judge’s decision, your personal assets are protected.
Example 2: You have missed payments on your business credit card. Provided you have not given a personal guarantee, the card company can only pursue your business assets. Your personal assets are protected from any claim.
Example 3: You close your Instagram account and business after trolls hack your account. Sadly, you have run up debts which you are unable to pay. Nonetheless, if the business is an LLC, your personal assets will be shielded from creditors.
LLC Tax Benefits and Options for an Instagram Business
Instagram businesses can have relatively high revenue compared to expenses, and that can make an LLC attractive for tax purposes.
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 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
If an Instagram business owner believes they’ll be paying themselves a reasonable salary and at least $10,000 in distributions each year, they might benefit from another LLC tax option, the S corporation (S corp) tax status.
S corp tax status for an LLC can help reduce self-employment and overall tax burden under the right circumstances.
Credibility and Consumer Trust
Instagram hosts rely on consumer trust. Credibility plays a key role in creating and maintaining any business.
Businesses that form LLCs gain a level of consumer trust and credibility simply by forming an LLC.
Launch Your LLC With Tailor Brands
More than 84% of our readers form their LLC through a specialized LLC formation service like Tailor Brands in order to save time and avoid potential penalties.
How to Form an LLC
Forming an LLC is easy. There are two options for forming your LLC:
- You can hire a professional LLC formation service to set up your LLC (for a small fee)
- Or, choose your state from the list below to start an LLC yourself
Select Your State
- Alabama LLC
- Alaska LLC
- Arizona LLC
- Arkansas LLC
- California LLC
- Colorado LLC
- Connecticut LLC
- Delaware LLC
- Florida LLC
- Georgia LLC
- Hawaii LLC
- Idaho LLC
- Illinois LLC
- Indiana LLC
- Iowa LLC
- Kansas LLC
- Kentucky LLC
- Louisiana LLC
- Maine LLC
- Maryland LLC
- Massachusetts LLC
- Michigan LLC
- Minnesota LLC
- Mississippi LLC
- Missouri LLC
- Montana LLC
- Nebraska LLC
- Nevada LLC
- New Hampshire LLC
- New Jersey LLC
- New Mexico LLC
- New York LLC
- North Carolina LLC
- North Dakota LLC
- Ohio LLC
- Oklahoma LLC
- Oregon LLC
- Pennsylvania LLC
- Rhode Island LLC
- South Carolina LLC
- South Dakota LLC
- Tennessee LLC
- Texas LLC
- Utah LLC
- Vermont LLC
- Virginia LLC
- Washington LLC
- Washington D.C. LLC
- West Virginia LLC
- Wisconsin LLC
- Wyoming LLC
For most new business owners, the best state to form an LLC is the state where you live and where you plan to conduct your business.
Do LLCs Need Insurance?
All businesses need insurance to protect their business assets — even LLCs. This is because the limited liability protection from an LLC protects your personal assets, not your business assets.
Instagram businesses need insurance because they may face claims of copyright infringement or libel. General liability insurance will cover such claims, as well as property damage and personal injury.
Common Situations Business Insurance May Cover for an Instagram Business
Example 1: To gain additional exposure for your business, you sign up to participate in a convention. The convention requires all participants have at least $1 million of liability insurance. A general liability policy would ensure you fulfill that requirement.
Example 2: When the chair in which your client sat during a meeting breaks and injures him, he sues your business for reimbursement of his medical bills as well as pain and suffering. General liability insurance would cover your legal expenses and any damages awarded by the court.
Example 3: Without your knowledge, an employee posts a copyrighted photo. The photo’s owner sues you for copyright infringement. General liability insurance would cover your legal representation and any court-awarded payouts.
Other Types of Coverage Instagram 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 Instagram businesses should obtain.
Commercial Auto Insurance
Since you will be driving your truck on public roadways, you are mandated by the state to carry a commercial auto policy. Auto insurance protects not only your vehicle but any liability you may have in an accident. Your personal car insurance will not cover you if you are driving the business vehicle, even if you are off duty.
Commercial Property Insurance
If you own your location instead of renting, you need commercial property insurance to protect the building. If your business is based out of your home, your homeowners’ insurance will not cover the home when it is being used for commercial purposes. Property insurance also covers items owned by your business.
Instagram businesses invest heavily in the equipment that is used to complete their work. Be sure that you have enough coverage to replace all of your equipment in the case of a loss. This coverage is generally offered in a Business Owner Policy (BOP).
In addition to the policies outlined above, there are a few other types of coverage your Instagram business may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.
Workers’ Compensation Insurance
If your Instagram business has any employees (full-time or part-time), you are legally required to carry workers’ compensation insurance. This type of coverage will help compensate your employees in the case that they get injured on the job.
Read more about workers’ compensation insurance.
Business Interruption Insurance
In the event of a fire, flood, or other catastrophes, there is a good chance your business operations will be halted for some time. Business interruption coverage is designed to help you recoup a portion of the revenue your business would lose due to the inability to operate.
This type of insurance is typically included in a business owner’s policy.
Commercial Umbrella Insurance
Umbrella coverage allows you to extend above and beyond the standard limits of your other business insurance policies. If you are faced with a large lawsuit or other claim situation, there’s a possibility that the coverage limits of your standard policies will be insufficient. In this case, your umbrella policy will allow you to surpass these limits.
Should I Start an LLC FAQ
The better business structure depends on your business’s unique circumstances and needs. However, unless your business is low profit and low risk, an LLC is likely the better option.
It will be important for you to consider general liability insurance when you are preparing to start your Instagram business.
Read our Business Insurance article for more info.
Opening an Instagram business is affordable. The main pieces of equipment required are a computer and a good video camera, which together may set you back $2,000. Ongoing costs may include payment to contractors or employees, and commercial insurance.
Visit our How to Start an Instagram Business guide to learn more about the costs of starting and maintaining this business.
Like most businesses, you will have ongoing expenses for insurance, marketing, and costs to keep up your equipment. If you choose, you can set up your business with very little need for ongoing overhead expenses.
A business on Instagram can make money through the profits from your own products, being an affiliate to sell other companies’ products, or by directly advertising other businesses and their products on your platform.
Instagram businesses have been a growing and evolving market, mainly because of the 1 billion users and 500 million active daily users on the platform. Everything from physical and digital products to service-based businesses have been finding ways to increase revenue and access the market.
While the business can be a low-cost and low-risk endeavor to grow, there is still an opportunity for errors and a risk.
