Why Social Media Influencers Should Form LLCs - Klein Moynihan Turco LLP

Why Social Media Influencers Should Form LLCs

As defined by the Screen Actors Guild (SAG-AFTRA), social media influencers are “popular content creators who have amassed a social media following that they capitalize on by making deals with advertisers to promote brands through the Influencer’s creative content, which they distribute through their social media feeds.” Like businesses, influencers (even though they may be individuals) are liable for contract violations, and any other legal issues otherwise connected with their influencer content. However, influencers can limit their personal liability and be eligible for labor union admission if they form a legal business entity. To limit their personal liability, while not increasing their tax obligations, social media influencers should form LLCs (“Limited Liability Companies”).  

Influencers Should Form LLCs to Limit Personal Liability 

The LLC is one of the most popular corporate vehicles for new ventures (e.g., influencers) due to its benefits and ease of formation. The LLC combines the tax advantages of a partnership (no corporate-level tax) with the limited liability of a corporation (limited liability for LLC “members”). Additionally, the formation process for an LLC is generally easier (fewer documents required and less formality) than that for a corporation. However, unlike corporations, LLCs are limited in the number and type of investors permitted and in their ability to go public. In forming LLCs, it is recommended that influencers draft and enter into operating agreements, which serve as the contract between influencers and any additional LLC members.

Influencers Should Form LLCs to Join the Screen Actors Guild

In February 2021, SAG-AFTRA began allowing social media influencers to join its labor union and released an “Influencer Agreement.” SAG-AFTRA decided to extend its membership to influencers because of the growing influencer marketing industry and its lack of union representation. Prior to the SAG- AFTRA Influencer Agreement, influencers had no viable path to union membership. By joining SAG-AFTRA, influencers have access to Pension and Health plans, among other benefits.

Please note, however, that influencers can only sign SAG-AFTRA’s agreement if they are corporations or LLCs. For the reasons listed above, influencers should form LLCs if they want to join SAG- AFTRA. SAG-AFTRA treats influencer companies like advertising agencies that are paid by third-parties to produce, edit and distribute content. Only solo influencers (i.e., no family YouTube channels) can sign the Influencer Agreement, provided that they produce their content with no involvement by any third-party production entities. Additionally, social media influencers must own their own intellectual property and have direct contractual relationships with brands that they advertise for or work with.

If you are interested in learning more about this topic or need assistance in connection with forming an LLC or your social media career in general, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.

If you are interested in learning more about this topic or providing or soliciting product endorsements, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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Photo by Laura Chouette on Unsplash

Related Blog Posts:

Legal Concerns for Product Endorsements by Social Media Influencers

The Legal Implications of Social Media Marketing in 2021

Why Operating Agreements Are a Must for Any New LLC

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