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 form 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.
Some examples of liability include faulty products, breach of contract, copyright infringement, and data breaches.
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.
What is an LLC?
Limited liability legally protects a business owner’s personal assets in the event that a business is sued or defaults on a debt.
Most small businesses will benefit most from forming an LLC versus other business structure types. This is because LLCs are inexpensive, simple to form and run, and LLCs can protect a business owner’s personal assets from lawsuits and creditors.
Some business owners choose to form an LLC themselves, which can be done by following our step-by-step Form an LLC guides.
We generally recommend hiring an LLC formation service so that business owners can focus on generating income and growing their business.
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
Step 1: 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.
Step 2: Name Your LLC
When you file your LLC's formation documents, you'll need to give your Instagram business a unique name.
Once you find a business name, check if your name is available as a web domain with GoDaddy.
Find a Domain Now
Step 3: Choose an LLC Registered Agent
Your LLC registered agent will accept legal documents and tax notices on your LLC's behalf. You will list your registered agent when you file your LLC's Articles of Organization.
Hiring a registered agent service offers a number of benefits, including privacy and peace of mind.
Many of these Best LLC Services offer a free year of registered agent service when you hire them to form an LLC.
Step 4: File Your LLC's Articles of Organization
The Articles of Organization, also known as a Certificate of Formation or a Certificate of Organization in some states, is the document you will file to officially register your LLC with the state.
Step 6: Get an EIN
An Employer Identification Number (EIN) is a number that is used by the US Internal Revenue Service (IRS) to identify and tax businesses. It is essentially a Social Security number for a business.
EINs are free when you apply directly with the IRS. Visit our What is an EIN guide for instructions for getting your free EIN.
Should I Start an LLC FAQ
What is limited liability protection?
Limited liability protection is one of the benefits of an LLC. It means that the owner’s personal assets are protected if the company is sued or goes into debt.
Visit our corporate veil guide to learn more about maintaining your LLC's limited liability protection.
What is a corporate veil?
LLCs and corporations protect their owners from personal liabilities for the business’s debts. This protection is often referred to as the corporate veil.
Is a single-member LLC the same as a sole proprietorship?
No. A single-member LLC is a type of limited liability company, which is different from a sole proprietorship. Unlike sole proprietorships, a single-member LLC is formed by filing organization documents with your state government office.
Single-member LLCs are legal business structures that offer liability protection, branding, credibility, and privacy that a sole proprietorship doesn’t.
Which is better — LLC or sole proprietorship?
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.
How much does an LLC cost?
The primary cost of forming an LLC is the state filing fee. This fee ranges from $40 to $500 depending on your state. You can read more details in our How Much Does It Cost to Form an LLC article.
What are the benefits of an LLC?
Some advantages of an LLC include personal asset protection, reduced paperwork when compared to corporations, tax flexibility, and increased credibility with customers and creditors.
Can I transfer my DBA name to my LLC?
The rules regarding DBAs can vary from state to state. Read our How to File a DBA guide for more information.
Do I need to open a business bank account for my LLC?
Using a dedicated business banking account is essential for personal asset protection.
When you mix your personal and business accounts, your personal assets (e.g., your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing the corporate veil.
How do I pay myself from my LLC?
How LLC owners pay themselves depends on how the LLC is taxed, the number of members, and any agreements regarding profit sharing and sweat equity.
Visit our How Do I Pay Myself From My LLC? article to learn more.
How much does it cost to start and maintain an Instagram business?
Visit our How to Start an Instagram Business guide to learn more about the costs of starting and maintaining this business.
What are the ongoing expenses of running an Instagram 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.
How do Instagram businesses make money?
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.
Are Instagram businesses risky?
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.