Increasingly, athletes and entertainers use business entities such as corporations or Limited Liability Companies (LLC) as a vehicle for providing their service. In most cases, the individual is the company’s C.E.O and sole employee. The loan-out company then enters into employment, endorsement, and other contracts on behalf of the athlete or entertainer. Essentially, the loan-out company “loans out” the services of its employee.
There are several reasons for forming a loan-out company.
A major advantage of a loan-out company is the ability to obtain a wide range of tax benefits. In the case of actors, who often receive just a few large payments in the course of a year, a loan out-company is ideal for ensuring that money is handled in a tax-advantageous way. Because the studio or production company is paying the company, rather than an individual, all business expenses incurred are tax-deducted. The company can also create medical reimbursements, a pension plan, and other benefit programs for its employee.
Limitation of Liability
Entities such as corporations also serve to protect an individual’s personal assets from liabilities associated with the business. Wealth and notoriety make athletes and entertainers particularly vulnerable to financial predators and frivolous lawsuits. Because the loan-out company is a separate legal entity, the individual’s personal assets are not at risk.
Aside from the benefits outlined above, the best part about forming your own company may be the ability to choose a name which best suits you. While that part is all up to you, Boyd Law’s attorneys have the experience, knowledge, and resources to handle all aspects of business formation. Call us today at 310-777-0231 for a free consultation.