Now that you are getting into the adult entertainment industry you have to start considering the business aspect of what you are going to be doing whether that is being a content producer, director, performer, dancer or even a webcam performer. Instead of being paid personally you have the ability to form a company and have anyone paying you to pay that company instead. There are numerous advantages to having a company. Two of the best are to help lower your taxes and to increase your privacy.
There are several ways you can structure your business, i.e., Sole Proprietorship, Corporation, Partnership, Limited Liability Corporation, but which is the right choice for you. There are numerous reasons for choosing each entity, and there are associated tax consequences and benefits for each and therefore I recommend that you also speak to a CPA before deciding which to use.
By far this is the easiest and simplest structure. It only consists of someone setting up and operating a commercial business. This is also one of the least expensive types of structures to set-up. However, be aware, that even operating your business as a sole proprietorship might still require you to pay certain fees to register the business, secure a fictitious business name certificate and obtain other licenses that might be necessary from your county or city.
The only real advantage to a sole proprietorship is that it is inexpensive and that you are entirely in charge of your business affairs. However, on the other hand, you will also be personally responsible for all the business’s debts and liabilities. Which basically means that if something goes wrong, you as an individual will have to pay for it. Just closing the business will not relieve you from any liability.
Corporations are the usual choice for most business in the United States, since this type of structure provides tax advantages as well as protection of your personal assets from the debts and liabilities of the company. Usually, corporations can be organized in two forms, C-corporation and S-corporation. However, in order to protect your assets, the corporation must be properly formed and maintained, otherwise it might be considered a shell and you will not be afforded the protections that you would be if the business was properly organized.
In order to properly form a corporation, California and most states require the drafting of Articles of Incorporation and payment of fees to Secretary of State in order to be recognized as an official corporation. You will also have to pay certain fees to the tax board of your state as well to maintain your corporate status. A corporation may be owned and operated by a single person, however, most involve several shareholders. Further those that own and operate a corporation have titles such as President, Vice President, Chief Operating Officer, Secretary etc.
There are numerous websites that can form and register your corporation for a fee, usually costing around $750.00. I strongly recommend that if you are going into the adult business, you seek the legal advice of competent legal counsel when you seek to incorporate. It can be quite beneficial to start a relationship with your “corporate counsel” early on. While the online services can do it cheaper and perhaps quicker, they are not usually operated by attorneys and can not give specific legal advice.
This is also a viable option for your structure, however, it affords less protection that a corporation. However, before you can call yourself partners, you will need a Partnership Agreement. A Partnership Agreement really requires the advice and counsel of an attorney. There are however different types of partnerships and even different partners within the same partnership. There are limited liability partnerships which protects each partner from each other’s wrong-doing or negligence. There can be general partners and limited partners in a LLP.
You can have just a general partnership without the protection afforded by a LLP from your partners. Which means that each partner will be responsible for the debts and liabilities of each of the other partners with joint and severally liability. Which means that one partner might have to pay the debts of all of the other partners by himself/herself.
Your partnership might also team up with another corporation or partnership to conduct a joint venture.
Limited Liability Corporation
A LLC is a structure that has the benefits of a partnership, in regards to flexibility and the protection of personal assets from the liabilities and debts of the corporation. However, not all states recognize limited liability corporations. For those states that do recognize this structure, sometimes the protection afforded them is not as complete as the protection afforded corporations. The formation and the operation of a limited liability corporation can be very complex and difficult to understand. Failure to properly organize and maintain the LLC can cause you to lose whatever protections you might believe you have with this type of structure.
If you are going to have several partners in the LLC you will need to have a properly drafted Operating Agreement in order so that all of the rights and responsibilities of all of the partners are clearly spelled out. The one issue that most partners in an LLC fail to do is to have an Operating Agreement. The operating agreement is significant since it will usually cover issues such as what will happen if one partner wants to sell his/her part of the business. Or even what happens if one of the partners passes away. These are all issues that you must plan for when drafting an Operating Agreement as well as a Partnership Agreement.
Whatever business structure you choose, do so based on the advice of a lawyer as well as a CPA. Owning your own company can provide tax benefits and write-offs that you might not otherwise receive filing your taxes as a single/married individual.