S Corp Status for Creators and Influencers: 3 Advantages You Need to Know

If you earn a living online as a creator or influencer, one of the most important things you can do to protect yourself (and your money) is to incorporate yourself as a legal business entity. The first step is registering an LLC—and if you’ve already done that, you’re headed in the right direction.

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However, there’s one more step that can save you thousands of dollars when tax season rolls around: electing S corp status.

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An S corp (short for subchapter corporation) is a tax designation where business owners are considered salaried employees, which can save you thousands of dollars on self-employment taxes. Becoming an S corp has big benefits for online creators and influencers, but navigating the process can be tricky.

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In this article, we’ll explain how S corps work, why they’re ideal for thriving creators, and how to elect S corp status for your business.

An S corp is a tax classification that allows a business owner to become a salaried employee. An S corp is still technically an LLC—you’re just telling the Internal Revenue Service (IRS) that you want to be taxed differently.

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S corps utilize “pass-through taxation,” which means the owner (i.e. you) claims a percentage of the company’s profits on their individual tax return. This makes sure you don’t get double-taxed: once under the corporation and again as an individual.

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Many self-employed content creators and influencers elect S corp status to save on taxes and add some extra flexibility to their business.

Electing S corp status makes sense for creators and influencers, mainly for tax purposes. Let’s break down the benefits.

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1. Tax Savings

The main benefit of designating S corp status as a creator is to save money on taxes.

When you file your taxes as a sole proprietor or single-member LLC, you’re required to pay a 15.3% self-employment tax on your total income, which covers Social Security and Medicare. And that’s on top of your state and federal income tax.

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However, when you file as an S corp you only pay self-employment tax on the salary you designate for yourself. The rest of your profits can be distributed to yourself separately and won’t be subjected to self-employment tax.

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Here’s the catch: The IRS requires S corp owners to designate a “reasonable salary” for themselves. In other words, you can’t set your salary to $0 and claim all of your profits as distributions.

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There isn’t an official definition for a reasonable salary, but one rule of thumb is to designate 60% of your business income as salary and the other 40% as a distribution.

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Let’s say you’re a YouTuber earning $100,000 per year—here’s how two tax scenarios could play out.

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Filing as an S Corp

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• $100,000 (business revenue) - $60,000 (salary) - $10,000 (business expenses) = $40,000 (distributions)
• Taxes on the $60,000 salary: self-employment tax (15.3%) + state and federal income tax
• Taxes on the 40,000 distributions: income tax only

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Filing as an LLC or Sole Proprietor

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• $100,000 (business revenue) - $0 (no salary) - $10,000 (business expenses) = $90,000 (distributions)
• Taxes on the $90,000 distributions: self-employment taxes (15.3%) + state and federal income tax

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Bottom line: LLCs and sole proprietorships pay more in taxes on the distributions whereas S corps can save you around 15%.

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2. Credibility

You’re not just a creator, you’re a business—and operating as an S corp can give you more credibility since it’s a more formal and structured entity than a standard LLC. 

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This can be especially important if you plan to negotiate brand deals or launch products.

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3. Limited Liability Protection

S corps provide limited liability protection, which means your personal assets are generally protected from debts, lawsuits, and other liabilities your business might incur. 

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This is especially important for content creators who may face potential legal risks related to copyright infringement, defamation, or other intellectual property claims.

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Designating yourself as an S corps can save you thousands of dollars in taxes—but there are a few tradeoffs to be aware of:

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1. An S corp typically costs more money to set up compared to a regular LLC
2. You’ll have to fill out a good amount of paperwork to designate your S corp
3. Since you’ll be receiving a salary, you have to set up and run payroll (or have a professional service manage payroll for you) 
4. S corps require you to file a separate business tax return (Form 1120-S)

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Overall, the tax savings from electing S corp status outweigh the extra paperwork, especially if you work with a tax professional who can take some of that paperwork off your plate.

To qualify for S corp status, your business has to meet the following requirements:

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• Be a domestic corporation
• Have only allowable shareholders
• Have no more than 100 shareholders
• Have only one class of stock
• Not be an ineligible corporation such as certain financial institutions, insurance companies, and domestic international sales corporations

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If you’re a content creator or influencer based in the US, you shouldn’t have any trouble meeting these standards.

Here are the steps you’ll need to take to elect S corp status:

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1. Register your business as an LLC, if you haven’t already
2. Make sure your business meets the S corp requirements set by the IRS
3. Fill out and submit Form 2553 (in New York, you’ll also need to complete Form CT-6)

We’ll take a wild guess and say your tax designation probably wasn’t the first thing you considered when you started building your brand. But as you can see, a little bit of paperwork can make a huge difference in how much money you take home every year.

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If you’re a thriving creator who’s considering S corp status, Karat can help. We handle taxes, bookkeeping, payroll, and more for some of the world’s biggest creators.

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“Karat gets creator finances,” says YouTuber Brian James McManus, who runs the channel Real Engineering. “They know how to think about taxes and bookkeeping in ways that make sense to me and, just as importantly, reduce my risk and save me money.”

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Join the Karat Waitlist Today!