The California Legal Blog

This is part 3 of Anker Reed HSC’s blog series entitled “To Incorporate or Not to Incorporate? That is the Question”.

Which Business Entity Should the Entertainer Choose?

The analysis of which business entity will be most advantageous for an entertainer is no different from the analysis done with regard to which business entity will be optimal in any other industry. An analysis of the benefits and detriments with regard to liability, tax consequences, and control issues all factor in the decision of which business entity to employ. Over time, though, this analysis has been refined in that attorneys and accountants have recognized that certain business entities are more favorable in certain industries while other business entities more appropriately pertain to other industries.

The general analysis of the benefits and detriments of the various business entities have led attorneys and accountants to conclude that incorporating is more advantageous to an entertainer than forming a limited liability company, partnership, or other business entity. This is because the purposes for the formation of a business entity by an entertainer will not be served by any of the alternative business entities. The other attributes of incorporation, namely liability protection and control issues, become irrelevant.  Usually a corporation’s directors and shareholders will be shielded from liability in that a corporation and its owners are separate entities. This is untrue, though, when the shareholders have personally guaranteed the liability. This was a major teaching of the Basinger case, in that had Ms. Basinger signed the contract on her own behalf, this effectively would have been a personal guarantee of the contract. Additionally, the control issues are not important to analyze in that an entertainer is usually the sole shareholder of the loanout corporation.

* For specific inquiries regarding a business legal matter that you may have, you are welcome to visit our Business Organization Formation legal services page.