Counseling clients in the entertainment industry, it is clear the road to success is a difficult one for those in the arts. 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, their hard-earned pay should be properly protected. One method that deserves consideration is organizing a loan-out corporation.

From a legal standpoint, these corporations are essentially identical to single-member limited liability companies or sole-shareholder corporations. The term “loan-out corporation” is generally exclusive to 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 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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