Should I Start an LLC for My Twitch Business?

Starting a limited liability company (LLC) for your twitch business can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For a twitch business, lawsuits can arise from things like trademark and copyright infringements, slander allegations, and failing to disclose affiliate partnerships (as mandated by the Federal Trade Commission (FTC).

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your twitch business seem more credible

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

Should I Start an LLC for My Twitch Business?

Do I Need an LLC for a Twitch Business?

Even if you started streaming on Twitch as a hobby, viewership can increase quickly, putting more attention on your channel, which can create potential risk that you might not have considered.LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for a Twitch Business

By starting an LLC for your Twitch business, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Twitch businesses could benefit from liability protection because of the potential risk of intellectual property claims.

Twitch streaming is a growing business niche, and laws and regulations that affect it are still developing. One of the biggest potential risks for a Twitch streaming business is copyright infringement. Simply playing a song in the background during a stream could trigger a copyright claim against you, and theoretically, a video game company could do the same.

Example 1: A social media account is posing as you and collects personal data from several of your viewers. They are attempting to sue you over identity theft. Should you be found in the wrong, your personal assets would be protected by limited liability in the settlement.

Example 2: One of your most consistent viewers is suing you over financial ruin, as they have donated over $10,000 to you in the last year. Limited liability as an LLC would protect your personal assets in a settlement.

Example 3: The logo you use in your live streams shares many characteristics with a major bank, and they are suing you over copyright infringement. As an LLC, limited liability would protect your personal assets in the court’s ruling.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for a Twitch Business

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if a Twitch business owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

For questions about tax solutions for your Twitch business, we recommend scheduling a free tax consultation.

Credibility and Consumer Trust

Twitch businesses rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a professional LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance for your Twitch business.

There is a 30-day free trial for Twitch.tv, and after that, there is a monthly subscription fee of $5.99 to $10.99 per month, depending on the features desired. A high-speed Internet connection costs about $50 to $100 per month. You will also need a good computer for about $1,000, though higher-end rigs can cost upwards of $3,000.

You will need to pay for a high-speed internet connection and updating or replacing equipment, including computers, related computer hardware, and gaming equipment.

A Twitch business earns revenue from advertising, sponsorships, in-person events, subscription fees, donations from viewers, and winning gaming competitions.

Gamers who have a large following can qualify to stream their games live on these sites. The more internet traffic a gamer has, the more the streaming site will pay them. A professional Twitch streamer can potentially make thousands of dollars per month if they do the job full time.