ACTORS AS CORPORATIONS

Mar 17

When I began working professionally as an artist, I had no clue how to navigate taxes, finances, payroll… After all, this is the business of show - so why aren’t actors running themselves as a business as well? For many actors navigating their careers, the question of whether to incorporate can be a pivotal financial and professional decision. Incorporating means establishing a legal business entity — typically a corporation or an LLC (Limited Liability Company) — that separates your personal finances from your business finances. I wanted to

What Does It Mean to Incorporate as an Actor?

Incorporating as an actor involves forming a legal entity, such as an S Corporation, C Corporation, or LLC. This entity becomes the recipient of your acting income, and you, as the owner, pay yourself through the corporation. This separation can provide financial, tax, and legal benefits.

Pros of Incorporating as an Actor

Tax Advantages:
- Deductible Business Expenses: You can deduct business-related expenses, such as headshots, acting classes, agent fees, and travel.
- Potential Tax Savings: Incorporating can offer opportunities to lower your overall tax burden through strategies like paying yourself a reasonable salary and taking additional income as dividends (which might be taxed at a lower rate).
Limited Liability Protection:
- Your personal assets (like your home or personal savings) are typically protected if your business faces legal issues or debts. This is especially helpful if you are a coach, educator, or service provider.
Professional Credibility:
- Having an incorporated business can elevate your professional image and can be advantageous when negotiating contracts or seeking funding for independent projects.
Retirement Planning:
- Corporations can set up retirement plans with higher contribution limits than personal accounts, allowing for better long-term financial planning.

Cons of Incorporating as an Actor

Setup and Maintenance Costs:
- Incorporating involves upfront costs, annual filing fees, and possibly higher accounting expenses to manage corporate finances, bookkeeping, and payroll.
Complexity:
- Managing a corporation involves additional paperwork, regulatory compliance, and tax filings. It may require hiring a professional accountant or legal advisor.
Double Taxation (for C Corporations):
- C Corporations may face double taxation—once at the corporate level and again on dividends paid to shareholders. This can often be avoided by choosing an S Corporation structure if eligible.
Eligibility and Restrictions:
- Not all actors will benefit equally. If your acting income is inconsistent or below a certain threshold, the benefits of incorporating may not outweigh the costs you will incur by incorporating.

Should You Incorporate?

Incorporating is most beneficial for actors with steady, high-level income and significant business expenses. If you're frequently working on large projects, hiring staff, or developing your own productions, incorporation can provide structure and financial advantages. However, if your income is sporadic or minimal, it may be more advantageous to operate as a sole proprietor. This decision is really individual to your income and specific situation.

TIP: Consult with a tax advisor or accountant who specializes in entertainment industry finances to determine the best approach for your specific situation. I’m not an accountant or financial advisor, however these are pros and cons that I have found beneficial since experiencing this myself.

THE LOW DOWN

Incorporating is a significant step that can bring long-term benefits but also added responsibilities. Understanding the legal and financial implications is key to making the right choice for your acting career.

Take time to weigh both the pros and cons, seeking expert advice, and then carefully deciding whether incorporation aligns with your professional goals and financial landscape.

ADDITIONAL RESOURCES: