Content creators are both a business owner and a service provider, that service being entertainment. However, many creators do not utilize business entities, like LLCs, when providing their entertainment services. This leaves creators open to personal liability. If someone were to sue the creator for any reason related to their content, their personal assets (house, car, etc.) would be reachable through the lawsuit. Avoiding this liability is simple and can be achieved by properly utilizing a loan-out company.
What is a loan-out company and how do they work?
A loan-out company is the term for a business entity that the individual utilizes to provide their services. Loan-out companies can be either LLCs or Corporations, though the choice of which can have significant tax consequences. Third-parties, like sponsors or streaming platforms, would engage the creator’s loan-out company through a written agreement for the company to provide the creator’s services to the third party. While this may seem silly, a loan-out company serves as a liability barrier for any legal issues that are related to the stream. This means that if sued, the creator’s loan-out company would be liable, and only company assets (business bank accounts, PCs and other assets, etc.) would be reachable through the lawsuit. This means that the creator’s house, cars or personal bank accounts are much less likely to be reached through a lawsuit. Best of all, loan-out companies are easy to operate and inexpensive to create.
Importantly, once a loan-out company structure is utilized, the business’ assets must be treated as separate and apart from the creator’s personal assets. If not, creators can lose the limited liability protection that they sought from the business entity in the first place. That means creators will need to pay themselves from the business and only utilize the business accounts for business purchases. If creators treat the business appropriately and separate their personal and business expenses, then it is very difficult to lose the limited liability protection.
Should you use a loan-out company?
If you are streaming full time, yes. If you are streaming part-time and obtaining sponsorships, yes. Loan out companies are inexpensive to create and simple to operate, so the added protection against liability is worth it. If you would like assistance with creating your loan-out company, we are happy to help.
(This post was created by Mark Hamilton, a rising 3L at Marquette University Law School and intern at Quiles Law)
Quiles Law is an esports-focused law firm based in New York City.
1177 Avenue of the Americas
New York, NY 10036
(P) (917) 477-7942
(F) (917) 791-9782
Attorney Advertising. The information presented in this site should not be construed to be formal legal advice nor is it intended to form any attorney/client relationship. Our attorneys are licensed to practice law in the States of New York and New Jersey. Copyright Quiles Law, 2020. All rights reserved.