Last Updated: June 10, 2024, 9:38 am by TRUiC Team


How to Start an S Corp as a Videographer

An S corporation (S corp) is an Internal Revenue Service (IRS) tax classification that may help your videography business save money on its taxes. Videographers use video cameras and other tools to both film and edit footage for their clients. They may work for small businesses or even help big movie studios with filming. 

No matter how long your videography business has been open, you may be able to save thousands of dollars each year by having the IRS tax your business as an S corp.

Recommended: Save yourself the hassle and use a professional service like ZenBusiness to help you handle the initial S corp election paperwork.

Camera man taking a video.

What Is an S Corporation?

An S corporation (S Corp), also known as Subchapter S, is a tax status with strict IRS requirements and restrictions. If your business meets the requirements to be taxed as an S corporation, you will be eligible for certain tax benefits such as pass-through taxation and self-employment tax savings, which can be significant. 

Essentially, an S corporation provides the perfect opportunity for business owners to have both the benefits of a default LLC with pass-through taxation and some of the perks of a C corporation without the dreaded double taxation.

S Corp Requirements

In order to be taxed as an S corporation, your videography business must meet the following requirements:

  • Has 100 shareholders or less
  • Is a domestic LLC or corporation
  • Issues only one class of stock
  • Shareholders are US citizens or permanent resident aliens
  • Is owned by private individuals

What Type of Business Structures Can Start an S Corp?

An S corp designation can be elected by a formal business structure, specifically an LLC or a corporation. Informal business structures such as sole proprietorships and partnerships are not eligible for the S corporation classification.

How to Start an LLC Tip Icon

Don’t have a formal business structure? If your videography business isn’t currently an LLC or C corporation, our friends at ZenBusiness can form your legal business entity for you and elect S corp tax status in no time.

S Corp Tax Benefits Videographers Should Know About

S corporations enjoy certain tax benefits, such as pass-through taxation (all losses and profit — credits, distributions, deductions — pass directly to the owner). This is similar to how default LLCs are taxed. With pass-through taxation, all profits bypass the company and go directly to the owners, and owners pay on their personal tax return at their regular income tax rate.

Default LLC Taxes Explained

Business owners of default LLCs pay self-employment taxes and income tax on the distributions passed down to them. In other words, both types of taxes are imposed on all the money they receive after paying business expenses. Self-employment taxes include social security and medicare, and these two taxes.

S Corp Taxes Simplified

With an S corporation, owners are classified as employees and are paid in two ways: a salary and distributions.

Reasonable Salary

Since owners are employees, they must receive a salary, and therefore they must run payroll. Business owners pay self-employment taxes and income tax on their salaries. To qualify as an S corp, the business’s owner must pay themselves a “reasonable” salary. This is a salary equivalent to what someone else doing the same job would earn. When it comes time to select a salary that’s right for you, an online resource like Glassdoor or the US Bureau of Labor Statistics can give you pay ranges and averages for what videographers earn nationwide.

The average annual salary of a US-based videographer is $44,874 as of March 2023, according to Glassdoor. Keep in mind that this number can vary, depending on your level of experience and location. Where you live can impact your salary because areas with a higher average cost of living often pay more to compensate for that. Remember to consider these variables while doing your research to ensure you pick a reasonable salary for yourself.

Distributions

Unlike with the reasonable salary, the owner only pays income tax on the distributions. This means the business owner does not pay the self-employment tax of 15.3% on money taken as a distribution.

When Should a Videographer Elect S Corp Status for a Business?

This is a subjective question and will depend on your business and your goals. You need to be sure to take enough money in distributions to benefit from the advantages offered by an S corporation and offset the additional paperwork and fee associated with running payroll. In general, you will likely benefit from S corp status once your business makes at least $60,000 in earnings and $20,000 in annual distributions. These numbers are after paying business expenses. The IRS requires S corp owners to pay themselves a reasonable salary to ensure they aren’t lowering their compensation to avoid paying more on taxes — which would lead to loss of S corp status, fines, and even business dissolution.

Use our S Corp Tax Calculator to find out if an S corp is right for your business. Calculate your savings below:

S Corp Savings Calculator

Calculate how much you can save by choosing an S Corp tax classification

Recommended:

Are you a solopreneur looking to start your S corp or convert your existing LLC and start saving on taxes? Get your S corp started today with ZenBusiness.

Six Basic Steps to Start an LLC and Elect S Corp Status:

Step 1: Select a State

Step 2: Name Your LLC

Step 3: Choose a Registered Agent

Step 4: File the Articles of Organization

Step 5: Create an Operating Agreement

Step 6: Get an EIN and File Form 2553 to Elect S Corp Tax Status

Step 1: Select Your State

Step 2: Name Your LLC

If you don’t already have a business, you will first need to form one. You will need to provide your state with a unique name that is distinguishable from all registered names when you file your LLCs formation documents.

Our Business Name Generator and our How to Name a Business guide are free tools available to entrepreneurs that need help naming their business.

Step 3: Choose an LLC Registered Agent

Your S corp registered agent will accept legal documents and tax notices on your business's behalf. You will list your registered agent when you file your LLC's Articles of Organization.

Step 4: File Your LLC's Articles of Organization

The Articles of Organization, also known as a Certificate of Formation or a Certificate of Organization in some states, is the document you will file to officially register an LLC with the state.

Step 5: Create an LLC Operating Agreement

An LLC operating agreement is a legal document that outlines the ownership and member duties of your LLC.

Our operating agreement tool is a free resource for business owners.

Step 6: Get an EIN and Complete Form 2553 on the IRS Website

An EIN is a number that is used by the US Internal Revenue Service (IRS) to identify and tax businesses. It is essentially a Social Security number for a business. 

EINs are free when you apply directly with the IRS.

Elect S Corp Tax Status

During the online EIN application, the IRS will provide a link to Form 2553, the Election By a Small Business form.

Steps to Take After Starting an S Corp

Once you formalize your S corp, be sure to get your financials in line so you are ready to begin operating.

For business banking, check out our guide on the best banks for small businesses.

If you need to build your S corp credit, read our guide on how to build business credit and get a business credit card through Divvy.

Recommended: You’ve worked hard and deserve a break! If you make at least $20,000 in distributions, let ZenBusiness start your S corp, so you can focus on your business.

Videography Business Information

Experts in filming, videographers use their cameras to capture professional footage for their clients. Many also have video and sound editing experience as well as other post-production skills. While entry-level or amateur videographers can find work in most cities, those with more experience often work in California because it’s home to several film and television studios that need skilled camera workers and editors.

Data from September 2022 suggests that more than 43,000 videographers are actively employed in the United States. While it’s a constantly fluctuating business, the need for videographers is growing as the field continues to expand.

Why Most Videography Businesses Should Have a Legal Business Entity

In addition to the added legitimacy enjoyed by legal business entities, having a formal business structure will put liability for legal action on your videography business instead of your employees. For example, a client might attempt to sue you for damages if you knock over a cabinet of antiques while filming inside their home. In this instance, the client could only sue your business — not you — because legal business entities provide limited liability protection.

Is an S Corp Right for My Videography Business?

Examining your long-term goals will help you decide if electing S corp status is right for your business. In general, the S corp tax designation may not suit you if you plan to invest your profits back into your business and increase your investors.

The IRS also requires S corps to run payroll for all of their employees. If you have a small business for which you’re your only employee, the cost of running payroll may not be worth it to obtain this tax status. If you already run payroll for your business, however, this may not pose a problem.

Another IRS requirement S corps face is the 100-shareholder limit. Some small LLCs will have no issue with this, but it may turn off business owners looking to diversify their funding sources or network with a lot of interested parties. If you think you’ll want more than 100 shareholders, then making your business a C corp probably would be a better option.

Finally, the IRS also requires S corp owners to take a distribution from their business profits in addition to the reasonable salary they pay themselves. To maximize the benefits of this tax designation, you’ll need to take a distribution of at least $10,000. If you intend to reinvest your profits back into your business for upgrades or new equipment, then S corp status may not work for you. If, on the other hand, you’re largely content with your business and $10,000 won’t change much right now, you can take the distribution and reap the benefits of running an S corp.

Of course, only you can decide what’s right for your business. So take some time to consider if these terms seem acceptable for your current situation.

Videographer S Corporation Examples

Not all videography businesses will benefit from electing S corp status. Here are two examples to help illustrate when this tax designation can prove advantageous.

Scenario 1:

Imagine you run a videography business in Santa Monica, California. While you started this business on your own, it now includes three other videographers. After you shot an independent film two years ago, several clients referred your company to some major studios in the state. 

With business steadily growing, the studios now pay for your equipment while you film their projects. This took a great amount of financial pressure off your business, enabling you to start running payroll for you and your employees with the extra funds. 

A business like this could benefit from electing S corp status. Because your clients take care of your equipment costs and you already run payroll, you’d only need to monitor your active number of shareholders to ensure you meet the IRS’s criteria.

Scenario 2:

At the other end of the spectrum, let’s say you run a solo videography business in Omaha, Nebraska. You got your start filming weddings and editing the tapes for the clients. Since then, you’ve upgraded to filming local advertisements and public access shows that air on local television as well as doing some editing on the side. 

As you gain experience and referenceable clients, you continue to pursue your goal of creating a company with other like-minded people to work on larger projects. To get there, you’ll need to upgrade your equipment and find investors. 

An LLC would likely be a better fit for this business — at least for now. Reinvesting your profits back into your business takes priority in the near term as you work toward your goals. You also don’t want to limit your potential investors as you actively seek them out. In addition, the cost of running payroll may not be a wise investment when you’re the only employee.

Start an S Corp FAQ

An S corporation (S corp) is a tax classification that an LLC or a corporation can apply for that provides self-employment tax savings on distributions.

If you already have an LLC or C corporation, you can form an S corp by filing Form 2553 with the Internal Revenue Service (IRS).

S corps offer businesses tax advantages, and owners of S corps can save thousands of dollars on self-employment taxes.

While both LLCs and S corps benefit from pass-through taxation, they are not taxed the same way.

With an S corp, owners pay personal income tax and self-employment tax on a predetermined salary. They may then withdraw any remaining profits from the business as a “distribution,” which isn’t subject to self-employment tax. With an LLC, all company profits pass through to the owners’ personal tax returns, and then the owners must pay personal income tax and self-employment tax on the entire amount.

Both LLCs and S corps benefit from a provision in the Tax Cuts and Jobs Act of 2017 that allows qualifying owners of pass-through entities to deduct 20% of qualified business income (QBI) from their tax returns. However, for S corps, the deduction doesn’t apply to profits paid out as wages.

According to data from Glassdoor, the average salary of a videographer in the United States is $44,874 per year. This figure can vary by an individual’s experience and location, though, so remember to factor that in when choosing a salary reasonable for yourself. 

For example, a videographer in Los Angeles, California, will earn an average salary of $52,761 while a videographer in Little Rock, Arkansas, will make an average of $47,513 per year.

A distribution is a dividend that a shareholder/owner can take from the business profits that remain after a company pays all of its employees' salaries. Shareholders must pay personal income tax on distributions, but distributions aren’t subject to self-employment tax.

There’s no corporate tax rate for S corps. Instead, owners of S corps pay personal income tax on the company’s profits. This rate depends on each owner’s personal income tax bracket. 

In some states like California and New York, S corps may pay some form of tax at the corporate level.

The answer is “yes” for tax purposes, but “no” in terms of its business structure. An S corp is simply a tax status. If your business was an LLC, it’ll keep that as its business structure. The IRS will just treat it as an S corp at tax time.

While the IRS does require all businesses with employees to run payroll, you don’t need to do so if you’re a sole proprietor or have no employees who aren’t business owners. This is why it can be a difficult decision for small businesses to elect S corp status because they’d then need to start running payroll.