Why Start an LLC for Your YouTube Channel?

Starting a limited liability company (LLC) for your YouTube channel 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 YouTube channel, lawsuits can arise from things like including copyrighted music, misleading or false advertising, and statements that damage a third party’s reputation in your videos.

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

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

Do I Need an LLC for my YouTube Channel?

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 YouTube Business

By starting an LLC for your YouTube 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 YouTube business is sued or if it defaults on a debt.

YouTube businesses will often benefit from liability protection because of increased risk for copyright infringement and various other intellectual property claims.

Example 1: In a number of videos uploaded by your YouTube business, copyrighted music has been used without the proper permissions to do so. This prompted the license holder to sue your business for copyright infringement. Limited liability would protect you from being held personally responsible to satisfy any damages awarded to the plaintiff.

Example 2: One of the videos uploaded by your YouTube business contains a false statement about a competitor which they argue has significantly damaged their reputation and caused them financial harm. As a result, this competitor filed a defamation lawsuit against you. In this example, any liability to pay the plaintiff damages is limited to your business assets.

Example 3: After a video uploaded to your channel was found to contain false and misleading advertising, a consumer that was detrimentally affected after relying on this information sued your business for fraud. In the following litigation, your personal assets are safe from being pursued by the court in order to satisfy any business liability.

LLC Tax Benefits and Options for YouTubers

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 a YouTube channel 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.

For questions about tax solutions for your Youtube business, we recommend scheduling a free tax consultation.

Credibility and Consumer Trust

YouTubers can benefit from credibility because consumer trust 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.

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.

Insurance is useful for YouTube businesses in a number of ways. Its first benefit is the coverage it provides against the legal fees and damages that can result from your business being sued. Additionally, it is helpful for repairing or replacing any physical assets that could be damaged (such as your studio space and other equipment).

Common Situations Business Insurance May Cover for a YouTube Business

Example 1: Your video content is similar to that of another content creator, and they decide to sue you for copyright infringement and lost viewership. General liability insurance would likely cover the costs if you choose to fight the claim in court.

Example 2: One of your viewers feels slandered by your content, and they file a claim against you for personal damages. General liability insurance is likely to pay for the legal costs to either settle or fight the claim.

Example 3: You have a guest host come to your recording area for a special session. When they leave, they trip over a cord that was left in the walkway. General liability insurance would likely cover the costs of any medical expenses that result from the fall.

Other Types of Coverage YouTube 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 tow truck companies should obtain.

Commercial Property Insurance

If you own a recording studio for your YouTube business, you’ll need commercial property insurance to cover any damages that occur from natural disasters, vandalism, or fires. This insurance covers your commercial equipment (e.g., cameras, lighting), as well as the physical structure of the property.

Professional Liability Insurance

If you give professional advice on YouTube, you’ll need professional liability insurance in case you make an error or omit important information that affects your viewers in a negative way. This insurance is designed to cover any formal claims against you if someone believes they suffered a loss due to your content.

Home-Based Insurance

Home-based insurance is available to cover your commercial equipment and space if you operate your business from your home. A typical renters or home insurance policy is unlikely to cover commercial expenses you may incur in the course of home-based business operations.

In addition to the policies outlined above, there are a few other types of coverage your YouTuber business 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.

Commercial Umbrella Liability Insurance

This insurance is available to supplement a general liability policy once it reaches its limits. A general liability policy has financial limits placed in terms of how much a business owner can receive (e.g., $50,000 for legal expenses). Umbrella insurance will continue to pay above and beyond in case a serious lawsuit is filed against you.

Workers’ Compensation Insurance

Most YouTube businesses start as one-man shows, but you’ll need workers’ compensation insurance if and when you officially hire a part-time or full-time employee. This insurance covers all employees from accidents or injuries while on the clock. You will not need workers compensation for contracted employees.

Should I Start an LLC FAQ

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.

At a minimum, you will need general liability insurance and commercial property insurance.

Read our Business Insurance for YouTubers article for more info.

If you are considering creating a YouTube business, it is worth noting that the startup costs should be next to nothing. A camera of some sort will be required, and while many use professional video equipment, it is by no means necessary.

The only real costs should be that of a high-quality smartphone (with a good camera), and a high-quality microphone.

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

Ongoing costs will include the price of equipment used to film and produce YouTube videos, costs associated with producing and editing the content, and payroll for any employees aiding in the process of putting the YouTube videos together.

YouTube businesses make money by amassing large numbers of views on their videos. They are also able to make money by allowing other businesses to show advertisements on the videos.

Web-based content providers continually find ways of making money, now even through the production and distribution of informational videos on platforms such as YouTube.

Whether other businesses hire you to make videos, or you make videos in context to your personal established brand, YouTube businesses can amass large numbers of subscribers and viewers, which can make it a lucrative business platform.