What is a Loan-Out Corporation?

December 27, 2022

Are you a freelancer considering forming a loan-out corporation for tax savings and liability protection?

Typically Used by Freelancers

Loan-out corporations (also known as loan-out companies) are usually used by freelance workers like actors, writers, musicians, athletes, models, consultants, graphic designers, photographers, web designers, event planners, virtual assistants, social media managers, coaches, and other professionals.

Loan-Out Corporations act as Intermediaries

Loan-out Corporations act as a middleman between the freelancer and who the freelancers work for.

They are Separate Legal Entities

Loan-outs are considered separate legal entities. They are registered with the state and get their own EINs (Employer Identification Numbers) and file their own taxes.

The Freelancer Becomes the Loan-Out Corporation Employee

Basically, the freelancer works for the corporation and the corporation works for whoever wants to hire the freelancer.

Loan-Outs Provide Tax Savings and Liability Protection

By electing to have the loan-out corporation taxed as an S corporation, the freelancer can get some significant payroll tax savings. They can also receive some protection in case of lawsuits.

Need Help Forming a Loan-Out Corporation or Other Entity?

If you are a freelancer that needs help setting up a loan-out corporation or other entity type, LawInc is here to help.

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