How to form an S-corporation for Entertainment

Introduction

If you’re an entertainer trying to organize your career and decide how to structure your business, you probably want to know about all the different options. If you’ve been doing research on this topic, you’ve likely heard a lot about corporations. Corporations are one of the most popular ways for small businesses to organize themselves because they offer tax advantages and greater budget flexibility than sole proprietorships or partnerships with multiple co-owners. But there are other types of corporations that might be better suited for entertainment careers if your company meets certain criteria. One option is an S-corporation, which is designed specifically for small businesses owned by shareholders who aren’t actively involved in running their day-to-day operations (for example, actors or musicians who have hired managers). Here’s what you need to know before starting an S-corporation.

An S-corporation is a popular business structure for small companies because they offer tax advantages and budgetary flexibility

However, there are other options out there to consider as well.

• Limited liability Company (LLC): If you want flexibility but want to keep your personal assets separate from your business’s assets, an LLC may be right for you. This structure allows the owner(s) to work under their own name instead of using the LLC’s name on contracts or agreements. Also, unlike the C Corporation, it avoids double taxation by allowing owners to deduct losses from their individual income tax returns while preventing any money distribution from being taxed again at personal income rates when disbursed from the business account.
• Limited liability partnership (LLP): This is similar in many ways to an LLC, but each partner receives professional liability protection instead of having limited personal responsibility for debts incurred by other partners within the structure (this means if one partner does something wrong that causes damage or loss of property).

If you’re an entertainer and you’re seeking a more formal business structure for your career, you may want to form an S-corporation

An S-corporation is a popular business structure for small companies, as it offers tax advantages and budgetary flexibility. It’s also very common in the entertainment industry because of this flexibility—more than 70 percent of musicians with annual revenues below $100,000 choose this option, according to The New York Times.

Now let’s dig into how these two factors work together for entertainment businesses.

In order to create an S-corp, you must meet the following requirements of the IRS:

• have eligible shareholders
• have no more than 100 shareholders in the company
• all shareholders must be U.S. citizens or residents, estates, or certain types of trusts
• the issue of only one class of stock that includes voting rights

1. Have eligible shareholders

To be a shareholder, you need to have an ownership interest in the company. This means that you invest in the corporation by purchasing stock or investing money with the intention of earning profits. Any person who does this is considered a shareholder of an S Corporation.

An S-corporation must have at least two shareholders, but not more than 100 shareholders. In addition, every shareholder must be either:

• a U.S citizen or resident alien who has lived in the United States for at least one year before becoming a member of your business; or
• An estate that was created through your death and meets all other requirements for being treated as an “S” corporation under Internal Revenue Code Section 1361(b)(1).

2. Have no more than 100 shareholders in the company

An S-corporation may not have more than 100 shareholders. If you do, you’ll need to form a C-corporation instead. You can have up to 1,000 shareholders if all of them are non-resident aliens (a shareholder who is not a U.S. citizen or permanent resident).

3. Issue only one class of stock that includes voting rights

You can make your corporation an S-corporation by forming it as a single-class corporation with voting rights for all the shareholders. You don’t have to issue preferred stock or give employees options on shares of stock in your firm.

4. Comply with IRS rules on elections and substantive issues

• Issue an annual report. As an S-corporation, you are required to issue an annual report on Form the 1120S to the IRS and shareholders. The report must be filed by the 15th day of the 3rd month after your tax year ends.
• Keep personal finances separate from business finances. It’s important that you keep your personal finances separate from those of your company; this will prevent any potential conflicts or misunderstandings between you and the IRS if they were ever to audit your taxes or other documents associated with this corporation.
• Keep records of your business expenses and income: You’ll need these records when filling out tax forms each year, so it is important that they’re organized in a way that makes sense for both parties (you and whomever else may need access).

An S-corporation is a way to organize your entertainment career — but it’s not the only way!

An S-corporation is ideal for small businesses. If you don’t expect to earn more than $75,000 per year (or $50,000 if you are married), an LLC might be better for you. There are other options available as well; if your company doesn’t fit into any of these categories, talk to an accountant or lawyer who specializes in tax law.

Conclusion

Once you have your S-corporation, there are several ways to make money with it. You can book shows or sell tickets online or at local venues, run ads on social media and other websites, take payments for product and service sales.