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Creating an LLC as a Social Media Influencer

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Estimated reading time: 6 minutes

In 2004, Ted Murphy, a serial entrepreneur, observed a small group of independent creators beginning to influence public perception. These individuals were not only developing an impressive following, but their opinions and ideas were driving enormous amounts of traffic to their websites. Two years later, Murphy launched PayPerPost, the first marketplace that paid bloggers to be content creators for brands.

And so began the development of social media influencer marketing.

Since this time, the world has experienced a huge growth in social media use. In fact, about 60 percent of today’s global population uses social media, with the average daily usage equaling about 2.5 hours. As a result of this extreme growth, social media consumers are now looking to social media influencers to lead them in their decision-making.

Social media influencers are individuals who have built a reputation for their knowledge and expertise on a specific topic. They regularly post about topics on social media channels and generate large followings of people who closely and regularly examine their views. And social media influencers are extremely popular with brands because they inspire followers to buy and share products.

With the rise of social media marketing, these influencers have developed a popular trend. In fact, companies are frequently using influencers to seize the attention (and wallets) of consumers—specifically millennials, who tend to be less receptive to traditional marketing techniques.

Today’s brands commonly seek influencers who create content to endorse and support a product or service. And there is no question that this partnership is mutually beneficial. After all, companies can reach their target audience, while influencers continue to grow their following.

In addition to the notoriety that it brings, social media influencers can also make lots of money. Newbies might earn about $100 for each post, while some of the influencers with very large followings can earn millions of dollars. According to data from Vox, a micro-influencer (someone with between 10,000 and 50,000 followers) can expect to make between $40,000 to $100,000 per year, while influencers with millions of followers tend to make tens of thousands of dollars per post.

In fact, top influencers can earn hundreds of thousands to millions of dollars per year making the field quite a legitimate business. For example, entrepreneur Kylie Jenner makes an estimated $1 million per sponsored post on her Instagram, while singer Selena Gomez gets $800,000 per sponsored post, and star soccer player Cristiano Ronaldo earns $750,000.

As the popularity and income of influencers begins to grow, it makes good business sense to consider registering one’s influencer business as a limited liability company (LLC) due to the numerous benefits. Let’s examine this trend:

The Ins and Outs of a Limited Liability Company (LLC)

An LLC is a legally separate business entity, which is formed under state law. LLCs combine elements of a sole proprietorship, partnership, and corporation—and offer a great deal of flexibility for owners. The LLC owners determine their management framework, operational processes, and tax structure.

LLCs end with the phrase, limited liability company, or the abbreviation, LLC. An LLC provides members with liability protection from the debts and obligations of the business. In other words, a business creditor or someone who sues the business is unable to go after the owner’s personal assets. There are several important aspects to consider when forming an LLC, including the following:

–More market credibility and financing options

–Liability protection in the case of certain lawsuits and commercial debts

–Annual state filings

–Tax advantages and disadvantages

What are the Advantages and Disadvantages of Forming an LLC?

The advantages of an LLC include the following:

–When you form an LLC, you are creating a business entity completely separate from yourself.

–An LLC equates to a higher level of market credibility.

–Liability protection against commercial debts, lawsuits, and other obligations. Operating as an LLC means that your personal assets remain off-limits if you ever find yourself involved in any legal action.

–Easier to obtain equity and debt financing.

–Instead of personal loans, you are eligible for small business loans.

–You can take advantage of the tax benefits of being self-employed.

With an LLC, business owners experience the following drawbacks:

–State-related paperwork is required, as well as specific industry licensing.

–Annual state filings and fees are required

–In addition to paying federal, state, local, and self-employed FICA taxes, you may need to pay state business taxes and unemployment taxes.

What Should Influencers Do Before Developing an LLC?

Prior to creating an LLC, every social media influencer should learn the fundamentals of LLCs, how they work, their limitations, and exactly how they can protect a business. Before starting an LLC, influencers should do the following:

Choose a Business Name: Search availability of your business name and its similarity to existing names. Keep in mind that selecting a unique business name helps business owners avoid confusion and trademark issues.

Reserve a Name: Most states will allow you to reserve a name (by paying a fee) if you are not ready to file your LLC documents.

Develop an Operating Agreement: This is a roadmap that breaks down how the LLC will be organized. It highlights various items, such as voting rights, ownership interests, allocation of profits/losses, how meetings are run, governance, and a dissolution plan. This agreement defines LLC members’ rights and responsibilities, as well as minimizes any problems in the future.

Choose a Registered Agent: A registered agent is someone who receives official documents (such as subpoenas and lawsuits) on behalf of the LLC.

Create and File Articles of Organization: This important document includes the LLC name and address, the nature and purpose of the LLC’s business, the name and address of the registered agent (who is authorized to physically accept delivery of legal documents on behalf of the LLC), length of the LLC’s existence, and names of LLC members. An Articles of Organization must be written, signed, and filed with the State’s Secretary of State Office or a similar state agency handling business registration. 

Receive a Certificate of Existence: Your state will issue a certificate once all LLC documents are filed. Once you have this certificate, you can obtain a tax ID number and business licenses and permits.

LLCs are flexible business options that provide a great deal of protection for every social media influencer. Not only do LLCs protect you from business liabilities, but they have simple record-keeping rules, help you save on taxes, and allow you to open bank accounts, enter into contracts, and acquire business licenses and permits.

So let Inc Authority get your business up and running successfully. Reach out to one of our business specialist and set up your LLC so you can continue to thrive. We’re here to answer your questions and  Form your free LLC today! 

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