Last Updated: May 10, 2024, 10:56 am by TRUiC Team

Should I Start an LLC for My Social Media Marketing Business?

Starting a limited liability company (LLC) for your social media marketing 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 a social media marketing business, lawsuits can arise from things like posting offensive content on a client’s social media in error, losing access to a client’s social media account after a hack, or claims of defamation.

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

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

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Do I Need an LLC for a Social Media Marketing 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 a Social Media Marketing Business

By starting an LLC for your social media marketing 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.

Social media marketing businesses will benefit from liability protection because of the risk of trademark infringement, false advertising, violation of privacy, and defamation. 

Example 1: You are hired by a client to help grow their Instagram following and increase their exposure on social media platforms. However, during the campaign, you accidentally post offensive or inappropriate content that is criticized by followers. If the client sues, liability protection will limit any potential legal damages to only your business assets, protecting your personal finances from any losses.

Example 2: You are hired to manage social media accounts for multiple clients, but one client’s account gets hacked by a third party. As a result, the client loses access to their account and is unable to communicate with potential customers. If this happens, liability protection will limit any potential legal damages to only your business assets, protecting your personal finances from any losses.

Example 3: You are contacted by a customer who claims that you damaged their reputation online and are seeking compensation for damages. With liability protection in place, your personal assets will be protected from the lawsuit allowing you to focus on resolving any disputes with your customers.

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 Social Media Marketing 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 a social media marketing 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

Social media marketing businesses 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 loansgrants, and credit.

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

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 limited liability protection from being an LLC protects your personal assets, not your business assets.

Social media marketing businesses need insurance to protect their assets from potential financial losses due to copyright infringement, cyber-theft, data breaches, and more.

Common Situations Business Insurance May Cover for a Social Media Marketing Business

Example 1: During a meeting in a client’s office, you accidentally spill coffee on his expensive laptop. General liability insurance would pay to replace the client’s damaged property.

Example 2: Another social media marketing company files a libel lawsuit against your business. General liability insurance would cover your legal defense costs.

Example 3: While visiting your place of business to discuss his contract, a client slips on wet flooring in your restroom, breaks a wrist, and decides to sue your business. General liability insurance would pay for your legal fees.

Other Types of Coverage Social Media Marketing 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 social media marketing businesses should obtain:

Professional Liability Insurance

While you work hard to market your clients, there’s always a chance someone might decide you made a mistake or failed to perform your professional duties. If a client sues your business for negligence, professional liability insurance would cover your legal fees and any required settlement.

Workers’ Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time workers. 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 or death benefits stemming from a workplace accident.

Commercial Property Insurance

You made a major investment in the equipment, supplies, and real estate needed to run your social media marketing business. In the event of a fire, theft, or natural disaster, commercial property insurance would cover the cost of repairing or replacing your business-related property. This includes structural damage to your building and the business materials stored there.

Commercial Umbrella Insurance

While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.

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.

Read our Social Media Marketing Business Insurance article for more info.

You can start a social media marketing business with a computer, Wi-Fi, and a small budget for advertising. You may also need additional equipment and an office space if you plan on incorporating graphic design to your services or offering full agency services.

Visit our How to Start a Social Media Marketing Business guide to learn more about the costs of starting and maintaining this business.

The ongoing expenses of running a social media marketing business include administrative costs, research, marketing, and insurance.

Learn more about running a social media marketing business.

Social media marketing businesses make money by charging their clients a fee for various services such as creating and implementing a social media plan. Businesses may charge project-based or commission-based fees.

Learn more about starting a social media marketing business.

Social media marketing businesses help other businesses to understand and leverage social media trends and algorithms for success. Businesses will increasingly rely on social media marketing businesses as they did with advertising agencies in the past.

Social media marketing businesses can make over $100,000 a year. 

Learn more about starting a social media marketing business.

Related Articles

Article Sources

IRS: Limited Liability Company

IRS: S Corporations


SBA: Small Business Guide

SBA: Choose a Business Structure Guide

US Census Bureau: Small Business Statistics

SBA Office of Advocacy: Data on Small Business

FRED: SBA Data for Small Business