How to Start an LLC for YouTube (Step-by-Step Guide)

YouTube provides a platform for creators to share content and earn revenue, but it doesn’t offer specific protections for business owners. Its terms of service primarily protect the platform and not individual creators or their earnings generated from sponsorships, social media, and affiliate sales. Choosing to form an LLC adds a layer of protection for your personal assets and establishes a formal structure, which can be beneficial when negotiating with sponsors and advertisers to grow your business.

What is the best business structure for YouTube creators?

For anyone looking to turn their YouTube endeavor into a formal business, the first and most important decision to make is what kind of business structure you will use. This choice dictates everything from tax treatment to personal liability protections, and each has its own risks and benefits.

Sole proprietorships are a simple, common type of business entity that treat the owner and the business as one legal entity; corporations are the opposite, heavily complex but with total protection for owners and members. Sole proprietorships might leave you vulnerable to personal financial risk if your video content faces a lawsuit, and corporations can be too complicated for a small channel with limited resources.

An LLC combines the best aspects of being a sole proprietor and a corporation. It offers limited liability protection while being easier to manage than a corporation. For YouTube creators, an LLC is often the best choice because it strikes the right balance between liability protection, tax benefits, and ease of management.

Pros of an LLC

• An LLC shields personal assets from business debts and lawsuits. For YouTubers, this includes protection from common lawsuits like copyright infringement. If your channel is subject to one of these lawsuits, your business assets will be at risk, but you will not be personally liable.
• YouTubers can earn money through ad revenue, sponsorship deals, merchandise sales, and more. An LLC can help manage these diverse income streams efficiently with a more professional appearance.
• Forming an LLC adds professionalism and credibility to a YouTube channel. Brands and sponsors often prefer dealing with a company rather than an individual, which can lead to more sponsorship deals.
• Sponsors feel more comfortable working with a structured entity, which can enhance the appeal of your channel for brand partnerships.
• LLCs benefit from pass-through taxation, meaning profits are taxed at the owner’s personal income tax rate, avoiding double taxation.

Cons of an LLC

• Setting up and maintaining an LLC involves higher costs than a sole proprietor may face. For YouTube creators who rely on the income, this can result in less profit for owners.
• Different states have varying rules and fees for LLCs, which can complicate the setup process.
• While an LLC provides significant asset protection, there are limits. For instance, if a YouTuber personally guarantees a loan for expensive equipment, they could still be held liable if the loan defaults. Additionally, engaging in fraudulent activities can pierce the LLC’s liability shield and leave the owner personally responsible for damages.

Starting an LLC for YouTube: Step-by-step guide

Turning your YouTube channel into a formal business means taking steps to gain legal protections. The LLC formation process is run by states, so be sure to always check your state’s laws for the exact process you will want to follow. Across all states, you should expect these six steps to be required.

1. Choose a business name

Just like your YouTube channel has a unique name, your LLC must also have one. These can be the same if your channel’s name is available, or you can use another option as the legal business name.

When choosing a name, each state will have specific restrictions, but you generally must choose a name that meets these requirements:

• The name must be distinguishable from existing businesses registered in your state. Conduct a search through your state’s business registry to confirm availability.
• Your business name must include an appropriate designator, such as “LLC,” “L.L.C.,” or “Limited Liability Company,” to indicate its legal structure.
• Avoid using restricted words that could mislead the public about the nature of your business, such as “bank,” “insurance,” or “corporation,” unless you meet specific state requirements.

To ensure your name is available when you’re ready to file your LLC paperwork, you can reserve the name with your state’s business filing office. This typically involves submitting a name reservation form and paying a small fee until you are ready to officially set up an LLC.

2. Appoint a registered agent

A registered agent acts as your LLC’s official point of contact with the state. This individual (or entity) ensures that your business can receive important legal documents, maintaining compliance with state regulations.

Most YouTubers will act as their own registered agent, since the job affords flexible hours and working from home. If this is not possible or convenient, like for part-time or travel YouTubers, you can also use a professional registered agent service to take on the role.

3. Register your LLC

Registering your LLC is a pivotal step in officially forming your YouTube business as it registers you with the state. The Articles of Organization, also known as a Certificate of Formation or Certificate of Organization in some states, is the primary document required to establish your LLC.

Depending on the requirements, you may need to specify the business purpose on these documents. This is a general statement that explains the purpose of your business, so you will need to sum up the goal of your channel and your business activities. A simple example may be “Creating and distributing educational and entertainment video content on YouTube and other social media platforms.”

Along with the Articles of Organization, you will need to pay a filing fee. The amount varies by state but generally ranges from $50 to $500. Check your state’s business filing office website for the exact fee.

Some states have additional requirements, such as publishing a notice of formation in a local newspaper, so always check your state rules.

If you don’t want to complete these forms yourself, you can choose an LLC formation service to help. These services – including companies like Northwest, ZenBusiness, and Bizee – can help startups and small businesses complete the formation process and ensure everything is in compliance.

4. Obtain an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to identify your business for tax purposes. While not every YouTuber requires an EIN, it can help with:

• Opening bank accounts and other financial transactions.
• Creating legitimacy with business partners.
• Simplicity in LLC tax filing.

As your YouTube channel grows, you may find the need to hire employees or contractors to help with content creation, editing, marketing, and other tasks. When hiring, an EIN is required.

EINs are free and can be issued immediately through the IRS website.

5. Consider an operating agreement

If your YouTube channel is run by several people, an operating agreement is a good idea. It outlines ownership, day-to-day activities, and how profits and losses are handled. If you run your own YouTube channel, you can still have an operating agreement, but it’s not as necessary.

You can find operating agreement templates online or use a lawyer to help you draft one that meets your business’s needs.

6. Obtain business permits and licenses

To operate a YouTube LLC legally, you may need to obtain business permits and licenses, though requirements vary by location and the nature of your business activities. This may seem unnecessary for an online business, but the LLC designation could make it required.

You should consider all of these license types to ensure compliance:

• General business licenses: Some states will require all LLCs to have a general business license to operate in the state. These may need to be renewed regularly or have other requirements based on your state law.
• Sales tax permits: Depending on your state and the type of products or services you offer, you may need to obtain a sales tax permit. This allows you to collect sales tax from customers and remit it to the state. Even if your YouTube channel primarily earns revenue from ad revenue or sponsorships, you might still need to comply with state tax regulations if you have an e-commerce component. If you promote products and get a commission or even sell your own products, this would also require you to collect and pay sales tax.
• Occupational licenses: Certain types of businesses require occupational or professional licenses. For example, if your YouTube videos involve providing specialized advice, such as real estate or legal advice, you may need a relevant professional license if you present yourself as a licensed individual or expert. Check with your state’s licensing board to see if your content creation activities fall under any specific occupational licensing requirements.

Other considerations for YouTube LLC owners

Once your LLC is formed and operating, there are other steps you may need to take to keep everything going smoothly. The way you run your business may impact the exact things you need to take into consideration, but here are some of the most common and important.

Business bank account

Opening a business bank account is essential for managing your YouTube LLC’s finances. This separation of personal and business finances helps maintain clear records, simplifies tax filing, and enhances the credibility of your business.

For YouTubers, this is particularly important because you may receive income from various sources such as ad revenue, sponsorships, and merchandise sales. By keeping these earnings in a dedicated business account, you protect your personal assets and streamline financial management. Many banks offer specialized accounts for small businesses, with features like lower fees and better interest rates, making it easier to manage the diverse income streams from your YouTube channel.

Insurance requirements

Insurance is a crucial aspect for YouTube LLC owners to consider. Specific types of insurance ideal for YouTubers include:

• General liability insurance: Protects your business from potential lawsuits related to your content, such as defamation claims or copyright infringement.
• Copyright protection insurance: Specifically covers legal fees and damages associated with copyright lawsuits, which are common for content creators.
• Equipment insurance: Covers the cost of repairing or replacing expensive filming and editing equipment.
• Errors and omissions insurance: Provides coverage for claims of negligence or inadequate work, which can be important if you offer tutorials or advice.

As a YouTuber, you might not need certain insurances typically required for larger businesses or those with employees, such as workers’ compensation. Focus on the coverages that protect your unique business activities and assets.

Annual compliance

Maintaining your LLC requires adhering to annual compliance requirements, which vary by state. This often includes filing annual reports, paying renewal fees, and keeping detailed business records. Staying on top of these requirements ensures your LLC remains in good standing and avoids penalties or even dissolution.