Should I Start an LLC for My Talent Agency?

Starting a limited liability company (LLC) for your talent 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 talent agency, lawsuits can arise from things like fraudulent misrepresentations (e.g., concerning the salary the client can expect to earn) or breach of contract (e.g., for failing to book an agreed-upon number of jobs).

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

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

file folder that says recruitment and talents

Do I Need an LLC for a Talent 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 Talent Agency

By starting an LLC for your talent 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.

Talent agencies will benefit from liability protection because of the risk of trademark infringement, financial data breaches, contract disputes, and even workplace accidents.

Example 1: A senior employee at your talent agency signs a contract with a client guaranteeing to book him a certain number of jobs each year, yet your business fails to deliver upon this problem. As a result, the client sued your business for breach of contract. In the ensuing litigation, your personal assets are protected from being used to satisfy any business obligation to pay damages.

Example 2: An employee at your talent agency promises a client that they will be able to obtain a greatly exaggerated level of income, which turns out not to be the case. Since the client specifically hired your business because of this statement, he decided to sue for fraudulent misrepresentation. Limited liability protects you from being held personally responsible for this.

Example 3: While attending a meeting on the business premises of your talent agency, a customer broke their arm after falling down a set of faulty stairs that had evidently fallen into disrepair. As a consequence, the customer sued your business for this personal injury. In this instance, the court is prevented from pursuing your personal assets in order to satisfy any settlement it deems your business owes the plaintiff.

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 Talent 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 talent 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

Talent 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.

The primary draw of insurance for talent agencies is the financial protection it grants in the event the business is sued or is exposed to any other type of claim. That being said, it also has a number of fringe benefits, such as helping your business comply with certain state laws and providing peace of mind.

Common Situations Business Insurance May Cover for a Talent Agency

Example 1: You scheduled a client meeting late in the evening at your talent agency after the cleaning crew swept and mopped the floors. When your client arrives, the floors are still wet, and he slips and falls, hitting his head. Your general liability insurance policy may help cover any medical costs related to the injury as well as potential lawsuits.

Example 2: One of your employees accidentally leaves a box in a stairwell. As a result, one of your clients trips and falls over it, resulting in a severe injury and the need for immediate medical attention. Your policy may cover accident-related costs.

Example 3: Nothing went wrong during your meeting, and you didn’t hear about any accidents on your property. However, seemingly out of nowhere, you are confronted with an accident-related lawsuit. Your general liability insurance policy may cover the costs associated with any potential frivolous lawsuits or false claims.

Other Types of Coverage Talent 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 talent agencies should obtain.

Professional Liability Insurance

Professional liability insurance is also sometimes referred to as errors and omissions insurance. It protects you against lawsuits related to mistakes made during the course of business or by a member of the talent agency.

Commercial Umbrella Insurance

Commercial umbrella insurance helps pay extremely high-dollar general liability insurance claims that exceed the original policy’s limitations.

Workers’ Compensation Insurance

Workers’ compensation insurance helps pay for employee injuries that occur while they are working. Common on-the-job injuries include slips, falls and back injuries. If a company has part-time or full-time employees, it is legally required to carry this coverage in most states.

Commercial Property Insurance

If your talent agency has a physical location, you’ll need commercial property insurance, which pays for certain covered losses that may include fire, theft, vandalism, and certain weather events.

Cyber Liability Coverage

Cyber liability coverage protects you in the event that your digital information, like customers’ personal and banking information, is stolen.

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 Talent Agency Business Insurance article for more info.

Owners of talent agencies can expect to be required to pay up to $30,000 in annual startup costs. The largest component of this figure is certain to be spent on your workspace, though large amounts will likely also be spent on publicity, licensing, insurance, and promotional material.

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

Some of the main operating expenses for a talent agency are office space and the cost of meeting with and entertaining potential new clients.

Learn more about running a talent agency.

Talent agencies typically make money by charging their clients a commission percentage of their earnings.

Learn more about starting a talent agency.

Talent agencies help actors, musicians, athletes, performers, and others book jobs and manage their careers.

A talent agency’s income is dependent on the talent it manages and how in-demand they are, but the earning potential is very high. Starting a talent agency is no easy task, as you’ll have to convince clients that you have the expertise and connections to help them succeed.

Learn more about starting a talent agency.