Should I Start an LLC for My Modeling Agency?

Starting a limited liability company (LLC) for your modeling agency 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 a modeling agency, lawsuits can arise from things like defaulting on a loan, contractual disagreements with models and/or vendors, and wage theft allegations.

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

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

a model showing off her designer outfit and designer purse

Do I Need an LLC for a Modeling Agency?

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 a Modeling Agency

By starting an LLC for your modeling agency, 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.

Modeling agencies will benefit from liability protection because of the risk of being sued for personal injuries, property damage, contract breaches, and more.

Example 1: Your modeling agency is sued by a model who claims she should be paid for representing your business on a TV talk show. You disagree, since there was no prior agreement. In the unlikely event that she wins her case, payment will have to be made from business assets. Your personal assets are safe from any court judgment.

Example 2: Your modeling agency defaults on a loan and the lender obtains a court order. If the lender opts for garnishment, it can garnish your business bank account, but not your personal bank account, since your personal assets are protected.

Example 3: You decide to close your modeling agency after being hired by a TV network. At that point, liabilities of the business are more than assets. However, an unpaid creditor cannot go after your personal assets. They are protected by the limited liability shield of your LLC.

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 a Modeling Agency

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 a modeling agency 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

Modeling agencies 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).

Get Started

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, 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 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.

A modeling agency is no exception. It should carry general liability insurance to compensate anyone who sustains injury while in the agency or to effect repairs in the event of property damage. Legal fees, court judgments, and settlements might also be covered.

Common Situations Business Insurance May Cover for a Modeling Agency

Example 1: During a photoshoot, a freelance photographer trips on a set and injures himself. Because his injuries leave him unable to work for several months, he sues for damages to cover his medical bills as well as pain and suffering. General liability insurance would pay for your legal fees and the damages awarded by a court.

Example 2: At an event held by your modeling agency, one of your models knocks over a vase valued at $7,000. The venue sues, asking for a replacement vase. Your general liability policy would cover the replacement cost of the vase.

Example 3: Our designer accidentally uses a photo under copyright protection as part of your website rebuild, and the photo’s owner sues for copyright infringement. General liability insurance would cover your legal fees and the resulting payout.

Other Types of Coverage Modeling Agencies 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 modeling agencies should obtain.

Commercial Auto Insurance

Since you will be driving your agency vehicle 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 agency 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.

Modeling agencies invest heavily in the paraphernalia used to perform their activities. Be sure that you have enough coverage to replace all of your equipment in case of 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 modeling agency 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 modeling agency 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

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, professional liability insurance, and workers' compensation insurance.

Read our Modeling Agency Business Insurance article for more info.

The costs to start a modeling agency can vary considerably. At the low end, is a home-based agency that may take just $2,000 to get up and running. Ongoing costs would include promotional material, travel expenses (attending shows and visiting sponsors), plus rent, utilities, fees, and insurance.

Visit our How to Start a Modeling Agency guide to learn more about the costs of starting and maintaining this business.

Home-based agencies must pay for marketing, insurance, and travel. Those with a separate office also have rent and utilities.

Learn more about running a modeling agency.

A modeling agency earns a certain percentage of the profits of each model it contracts with.

Learn more about starting a modeling agency.

A modeling agency helps models find jobs in various industries, especially the fashion industry. Some modeling agencies work directly with models, while others work with another agency. Agents assist models in a variety of ways. These can include billing, payment, and marketing services.

Profits can be significant once an agency is established in the industry and it can acquire more contracts.

Learn more about starting a modeling agency.