Should I Start an LLC for My TikTok Business?
Starting a limited liability company (LLC) for your TikTok 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 TikTok business, lawsuits can arise from things like slander, intellectual property infringements, and data breaches.
LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your TikTok business seem more credible.
Recommended: Use Northwest to form an LLC for $29 (plus state fees).
Do I Need an LLC for a TikTok Business?
Even if you started your TikTok account as a hobby, one viral video can quickly gain you thousands of followers (or more). More attention on your videos can create potential risk that you might not have considered. 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 a TikTok Business
By starting an LLC for your TikTok 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.
TikTok businesses will often benefit from liability protection because of an increased risk for copyright infringement and various other intellectual property claims.
As with other platforms like YouTube or Twitch, a fellow TikTok content creator could claim that the content you create is too similar to some of their own content. Or, you could even face a copyright claim for playing a song in the background of your video.
Example 1: After acquiring a small business loan in order to redesign your business website, you experience a significant fall in revenue. As a result, you are no longer able to pay the loan back on time, and your TikTok business begins accruing debt. If the lending party was to file a lawsuit against you, you would not be found personally liable for compensating the claimant as a result of your limited liability in law.
Example 2: You partner up with a digital marketing firm in order to expand your TikTok business’s brand online. After not seeing an immediate increase in your sales, you refuse to pay the marketing company, which then files a lawsuit against you. Since your business is registered as an LLC, your limited liability in law will protect your personal assets from the claiming party even if your business is found liable in court.
Example 3: After your secretary does not respond to an email informing you that you are infringing on another business’s copyrighted content, a lawsuit is filed against your LLC. If your business is unable to compensate the claiming party, your personal assets will remain safe as a result of your business’s LLC classification.
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 TikTok 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 TikTok 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.
For questions about tax solutions for your TikTok business, we recommend scheduling a free tax consultation.
Credibility and Consumer Trust
TikTok 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 loans, grants, 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
- 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 in is the state where you live and where you plan to conduct your business.
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 for your TikTok business.
Starting a TikTok business can be done with a very small budget.
This is because you will only need:
- A work computer or laptop
- Editing software
- A high-quality phone
- A fast internet connection
Since you can easily start a TikTok business from your home, you do not need to worry about renting out an office if you do not want to.
Having said that, you are still encouraged to purchase business insurance, as well as look into getting all of the required business licenses and permits that you will need in order to operate legitimately.
Ongoing costs will include the price of equipment used to film and produce TikTok videos and costs associated with producing and editing the content.
TikTok businesses can make money by making and publishing branded videos and through off-platform deals.
A TikTok business creates and publishes short online videos through the TikTok platform. Some TikTokers can amass many followers and make significant money by publishing branded videos and making other off-platform branding or sponsorship agreements.
