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A Primer for Forming Loan-Out Corporations
In the entertainment industry, it can take years for actors, musicians and others to reach a point where their efforts begin bringing in a notable return. If and when these types of clients begin to make a consistently significant income, one method that deserves consideration for protecting the hard-earned pay is to organize a loan-out corporation.
From a legal standpoint, these corporations are essentially identical to single-member limited liability companies (LLCs) or sole-shareholder corporations. The term "loan-out corporation" is generally used in the entertainment industry and reflects that these companies — typically consisting of one owner — allow entertainers to "loan out" their services into independent contract relationships with third parties. Substantial tax benefits and asset protections may make these types of enterprises attractive once an entertainer begins taking in a more sizable income and is subjected to higher personal income taxes.
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