BizTech Law Blog

Since the 2010s, social media platforms have become one of the most popular uses of the internet, transforming the way individuals all over the world connect, share content, and build personal brands. As social media has grown, it has given rise to social media influencers – a term only recently added to the Merriam-Webster dictionary in 2019. Influencers have now turned their personal brands into thriving businesses of their own. Companies across the globe have partnered with influencers to market their products, and influencers have turned their online presence and posts into valuable intellectual property through their unique expression of ideas through their content. Those business relationships, assets, and revenue streams are worth protecting.

With influencing evolving from a casual online activity into a steady source of income – and with intellectual property increasingly generated through posts and other content – is it wise for influencers to establish a limited liability company (“LLC”) to protect their brand? Below we assess what an LLC is, and why it may be an advantageous business structure for social media influencers and content creators alike.

What is an LLC?

An LLC is an entity type that combines certain elements of both the corporation entity type and the partnership structure. Owners of LLCs are called members, and LLCs can be solely owned by one member or owned by multiple members. Members may include individuals, other domestic entities, or foreign entities. In the state of Michigan, pursuant to the Michigan Limited Liability Company Act, an LLC can be managed by either its members or a manager. Multiple members may manage an LLC, as well.

As its name indicates, an LLC is attractive to business owners because it offers additional legal protection against personal liability, meaning the members are not held personally liable for any business losses. LLCs are taxed on a “pass-through” basis, which means that all profits and losses of the business are filed on the members’ personal income tax returns, making is so that the LLC does not file its own return. In contrast, C corporations are subject to double taxation, which means the corporation pays corporate income tax on its profits through its own income tax return and its shareholders pay personal income taxes on dividends they receive from the corporation. This limitation of liability and pass-through taxation is often why LLCs are a more desirable choice for growing businesses.

Why is forming an LLC advantageous to influencers?

Influencers often underscore the fact that their unique online brand and the relationships they form with other companies and corporations constitutes a business of its own. Forming an LLC can be beneficial for influencers and social media content creators seeking to grow and protect their business for the following reasons:

1. You can separate your personal assets from your business assets. Without an LLC entity structure in place, it is very possible that your business is viewed by default as a sole proprietorship. In that situation, you would be personally liable for your business’ debts. So, for example, if a brand deal goes awry with another company and you end up owing money to that other business, you do not want that company to be able to claim a right to your personal assets. By setting up an LLC and separating the assets owned by your business from the assets owned by you personally (e.g., your car, home, etc.), you protect your individual property from creditors of your business. An LLC ensures in such a situation, you only risk losing the money you have invested in, and the assets you have assigned to, your business.

2. You have flexibility in the ownership structure of your business. As we mentioned above, an LLC can be owned by one person, but can be managed by multiple people. As your online presence, content creation, and business relationships continue to grow, you may consider delegating certain rights or responsibilities to other people. For example, you may be the sole owner of an LLC, but you may want a board of managers managing day-to-day operations of your business down the line (e.g., contract negotiation, brand deal terms, daily social media posts, etc.). This flexibility allows you to adapt your management structure as your business evolves, ensuring you can scale and operate efficiently as your brand expands.

3. Your business’ intellectual property can be held by the LLC instead of by you personally. You may not realize just how valuable your intellectual property is as an influencer. Your social media brand and your writings, video, photographs, logos, and taglines are protectable intellectual property. By applying for a trademark through the United States Patent and Trademark Office (USPTO) or registering your original works with the United States Copyright office, you may entitle your business to additional statutory protections and enforcement rights, making it easier to defend your creative assets and prevent unauthorized use. Safeguarding your intellectual property also makes it easier to license others to use it. We understand that social media influencers are often inspired by other content creators, resulting in the creation of trends, memes, and collaborative works that can quickly go viral. By holding your intellectual property within an LLC, you ensure that your creative contributions are properly protected and managed, allowing you to benefit from your originality while minimizing the risk of unauthorized exploitation or infringement.

You may recall the situation involving influencer Jools Lebron and her widely used phrases “very demure, very cutesy” and “very demure, very mindful.” See:

• https://www.npr.org/2024/08/28/nx-s1-5090081/very-demure-very-mindful-jools-lebron-trademark and
• https://www.pbs.org/newshour/nation/tiktok-creator-jools-files-very-demure-very-mindful-trademark-application

Because trademark applications for these phrases were not filed early, third parties later sought trademark protection for similar language, prompting disputes. As a result, Ms. Lebron was forced to expend time and resources to defend branding that had become closely associated with her work. This example underscores how valuable influencer intellectual property can be, and how proactively identifying, protecting, and holding that intellectual property through an LLC can help avoid costly disputes and preserve control over your brand.

4. You can enhance your business’ reputation and credibility. Establishing your business as an LLC signals to potential partners and brands that you are committed to operating in a professional and organized manner. This formal business structure can significantly increase your reputation and credibility within the industry, making companies more likely to trust you with collaborations or long-term partnerships. By presenting yourself as a legitimate business entity, you demonstrate that you take your brand seriously, which can open doors to new opportunities and foster stronger business relationships as your online presence grows.

5. You have the ability to join SAG-AFTRA as an influencer. Many content creators may not realize that they may be eligible to join the Screen Actors Guild – American Federation of Television and Radio Arts (“SAG-AFTRA”), an organization that provides its members with benefits and other financial opportunities not often afforded to self-employed individuals. However, in order to meet the eligibility criteria and sign an influencer agreement with SAG-AFTRA, influencers must structure their business as either an LLC or corporation. Other business structures, such as a sole proprietorship, are not permitted to join. For more information on your eligibility to join SAG-AFTRA, please see the following resource: https://www.sagaftra.org/influencer-agreement-fact-sheet.

Taking steps to legitimize your business as an influencer is not always easy. Establishing an LLC comes with certain formation costs upfront, requires you to file additional tax schedules for your business, and obligates you to comply with both state and federal regulations related to your entity structure and operations. Despite these extra steps, forming an LLC is often worthwhile for the reasons we outlined above. Compared to other business structures, LLCs typically involve less paperwork and fewer ongoing compliance requirements, making them an appealing option for many influencers.

Here at Foster Swift, we are dedicated to supporting influencers as they grow their businesses and strengthen their brands. We help business owners ensure their LLC ownership structure matches their goals. If you have questions about forming an LLC or need legal guidance with any aspect of your influencer business, please reach out to an attorney in our Business & Tax practice group for more information.

• Lindsey Mead...517.371.8326...lmead@fosterswift.com
• Olivia Reid...517.371.8371...oreid@fosterswift.com