If you’ve been in a creator group chat for more than five minutes, you’ve seen this debate. Someone says “just get an LLC.” Someone else says “you need an S corp.” A third person says they’ve been fine as a sole proprietor for years.
Here’s the twist: LLC vs. S corp isn’t really a head-to-head matchup. They do two different jobs, and a lot of creators end up using both. Let’s break it down so you know which one (or which combo) fits where you are right now.
The Big Difference: One Is Legal, One Is Tax
This is the part that clears up most of the confusion.
An LLC is a legal structure. It’s a business entity you form with your state. Its main job is separating you from your business so that, in many situations, your personal assets (like your house or savings) are better protected if the business gets sued or runs into debt.
An S corp is a tax election. It’s not a type of business you form from scratch. It’s a way of telling the IRS how you want your business taxed. An LLC (or a corporation) can choose to be taxed as an S corp.
So the question isn’t “LLC or S corp?” It’s closer to “Do I form an LLC, and should I also choose to be taxed as an S corp?”
Where Most Creators Start: Sole Proprietor
If you’ve been earning money from content and haven’t set anything up, you’re a sole proprietor by default. Your business and you are the same legal person, and your income and expenses go on a Schedule C with your personal return.
That’s perfectly fine for plenty of creators, especially early on. It’s simple and cheap. The downsides are:
No legal separation. If something goes wrong, your personal assets can be exposed.
Self-employment tax on everything. You pay 15.3% (Social Security and Medicare) on your net business earnings, on top of regular income tax.
What an LLC Does (and Doesn’t Do)
Forming an LLC gives you:
Liability protection. A legal wall between you and the business, as long as you treat it like a real, separate business.
A more professional setup. Brands and partners often like working with an entity, and it’s easier to open business accounts.
Flexibility. You can change how it’s taxed later without starting over.
What an LLC does not do on its own is lower your taxes. A single-member LLC is taxed just like a sole proprietorship by default. Same Schedule C, same self-employment tax. This surprises a lot of creators who assume the LLC itself saves money.
Two quick cautions:
Keep business and personal money separate. Mixing them can weaken the liability protection and makes your books a mess. Open a dedicated business account and use it.
Check your state. Fees and annual requirements for LLCs vary a lot, and some states charge a minimum annual tax even if you earn nothing.
Because forming an LLC is a legal step, it’s worth talking to a business attorney or using your state’s process. We handle the tax, bookkeeping, and advisory side once you’ve decided how you want to be set up.
What an S Corp Does
Here’s where the money comes in.
As a sole proprietor or default LLC, you pay self-employment tax on all of your net profit. With an S corp election, you become an employee of your own company and pay yourself a reasonable salary. You then take the rest of the profit as distributions, which are not subject to self-employment tax.
That’s the whole appeal: you can potentially reduce the amount of income subject to that 15.3%.
A Simple Example
Say your channel nets $120,000 for the year.
As a sole proprietor or default LLC: self-employment tax comes to roughly $17,000.
As an S corp paying yourself a $60,000 salary: payroll taxes on that salary are roughly $9,200, and the remaining $60,000 comes out as distributions without self-employment tax.
That’s a potential difference of around $7,800 in this simplified example. You still owe regular income tax on all of it, and the numbers change depending on your situation, so treat this as an illustration, not a quote.
The Catch: Added Costs and Complexity
An S corp isn’t free money. Once you elect it, you take on:
Payroll. You have to run real payroll for yourself, including withholding and payroll tax filings.
A reasonable salary. The IRS expects your salary to reflect what the work is actually worth. Paying yourself an unrealistically low salary is a red flag.
A separate business tax return. S corps file Form 1120-S (due March 15, or the next business day) and issue you a Schedule K-1. If you need more time, you file an extension with Form 7004.
More bookkeeping. Clean books matter even more. We talk about why in our post on bookkeeping for content creators.
Higher professional fees. Payroll services and a more involved tax return cost more than a sole proprietor’s filing.
If your savings don’t comfortably exceed those costs, the S corp isn’t worth it yet.
So When Does an S Corp Make Sense?
There’s no magic number, but here’s a useful rule of thumb. Around $80,000 in net profit (what’s left after expenses, not total revenue) is where the conversation usually starts. Once you’re consistently netting six figures, it’s almost always worth a serious look.
Other things that factor in:
How steady your income is. Creator income swings. An S corp works best when you can reasonably predict where your year will land.
Your expenses. Net profit is what counts, not what comes in.
Your state. Some states add their own taxes or fees to S corps.
Your growth. If you’re about to jump from $60K to $150K, planning ahead can be smart.
Don’t copy your friend’s setup. What worked for another creator may be a bad fit for you, because their income, expenses, and state are different from yours. Our deeper guide on S corps for content creators walks through the thresholds and mechanics.
So, Which Is Best?
Here’s the short version:
Where you areWhat often makes senseJust starting or earning a littleSole proprietor, with clean tracking from day oneGrowing, with real income or liability concernsLLC, for legal separationNetting around $80K and up, with steady incomeLLC plus an S corp election, if the math worksNot sureRun your numbers before deciding
An LLC is about protection. An S corp is about taxes. Many creators eventually want both, but the right time depends on your numbers, not on what’s trending in the group chat.
Frequently Asked Questions
Can I have an LLC and an S corp at the same time?
Yes, and it’s the most common setup for creators. You form an LLC, then elect for it to be taxed as an S corp. The LLC is the legal structure, and the S corp election is the tax treatment.
Does an LLC save me money on taxes?
Not by itself. A single-member LLC is taxed like a sole proprietorship by default, so your self-employment tax stays the same. The tax savings come from the S corp election, if it makes sense for your income.
Is an S corp worth it if I make less than $80,000?
Usually not yet. Payroll, extra filings, and higher professional fees can eat up the savings. It’s worth revisiting as your net profit grows.
What’s a “reasonable salary” for an S corp owner?
It’s what you’d reasonably pay someone to do your job in your business, based on the work you do and what’s typical for it. The IRS watches this closely, so it’s something to set with your CPA, not guess at.
Can I switch to an S corp mid-year?
Often yes, but there are deadlines and rules about the effective date, so talk to your CPA before making the move. Timing matters.
Do I need an S corp to write off my gear and expenses?
No. You can deduct ordinary and necessary business expenses as a sole proprietor or in an LLC. An entity isn’t required to write things off.
Does Game On Financial form LLCs?
We don’t. For formation, work with a business attorney or your state’s filing process. We help with the tax, bookkeeping, and advisory side, including whether an S corp election fits your numbers.
Not Sure What Fits You?
The right answer depends on your income, your expenses, your state, and where your channel is headed. That’s exactly what a creator-focused CPA is for.
Book a free discovery call with Game On Financial, and we’ll look at your numbers and help you figure out whether an S corp makes sense now, later, or not at all.
