An LLC is how most artists start, and it is usually the right first move. It is cheap to form, simple to run, and it separates your personal assets from your business so a lawsuit against your career does not take your car. The downside is taxes — every dollar of profit gets hit with self-employment tax on top of income tax. When your income is small, that is fine. When it grows, that tax bill gets painful fast.
An S-corp is not a different type of company so much as a tax election. You form an LLC or corporation, then elect S-corp status with the IRS. The benefit is real: you pay yourself a reasonable salary, and only the salary gets hit with payroll taxes. The rest of the profit flows through without the extra self-employment tax. On one hundred thousand dollars of profit, the savings can reach five figures. The catch is paperwork — payroll, quarterly filings, and an accountant who actually knows what they are doing.
Here is the rule of thumb I give artists. Under fifty to sixty thousand in annual profit, stay an LLC and keep it simple — the S-corp paperwork will cost you more than it saves. Once you are consistently clearing that range and your income is stable, talk to an accountant about the election. Either way, form the LLC early. It costs a few hundred dollars in most states and protects everything you are building. Do not wait until you are worth suing to think about this.
Your business structure should grow with your income, not ahead of it. Simple at the start, strategic as you scale. The goal is keeping more of what you earn while staying protected — and that takes one real conversation with a tax professional who understands creative careers.
About the Author – Ruben Burgos: Ruben Burgos brings over 25 years of music expertise and more than 15 years of model guidance to the table. He is the indie major pinnacle to retaining credits for musicians and helping them navigate this wicked industry without the fuckery.