How to choose the best legal entity for your OnlyFans agency

Choosing the right legal entity for your OnlyFans agency is one of the most important decisions you'll make as a business owner. 

It affects your liability, taxes, and business operations. It also impacts your agency's reputation with clients and partners.

We’ve created this guide outlining potential legal structures for your OnlyFans agency.

Whether you want to learn about legal requirements for your OnlyFans agency, forming an LLC for your OnlyFans agency, or about the OnlyFans agency incorporation process—we’ve got you covered.

Why form a legal entity? 

Forming a legal entity for your OnlyFans agency offers some major benefits.

When you establish a proper legal structure, you get:

• Liability protection: Your personal assets stay shielded from business liabilities. This means your house, car, and savings remain protected if your business faces legal challenges.

• Credibility: Partners and clients take you more seriously when you have a formal business structure.

• Tax benefits: Various business structures offer significant tax benefits, especially over time

• Growth potential: If you want to grow your business and convince investors to join, creating a legal entity is a no-brainer.

Now that you know the benefits of forming a legal entity for OnlyFans agencies, let’s explore the available legal structures.

Sole proprietorship

A sole proprietorship is ideal if you’re starting small and managing your agency alone. It’s the simplest business structure available. 

A sole proprietorship is an unincorporated business owned and run by one person. There’s no distinction between the business and the owner. 

It's quick and easy to set up. But, there's no liability protection. Your personal assets could be at risk if your agency runs into trouble.

For example, if you're a solo agency manager working with just a few Creators, a sole proprietorship might work.

But, as you grow and take on more OnlyFans Creators or staff, you may want to switch to an LLC for better protection.

Let’s review their pros and cons:

Pros

• Easy and cheap to set up: Sole proprietorships are extremely easy to set up and maintain. Many freelancers don’t even realize they’re currently sole proprietors.

• Complete control over business decisions: Since it’s just you, you get to call the shots on how the business operates and what strategy to take.

• Simple tax filing: Your business isn’t legally separate from you, so you report all business income and loss on your tax return.

• Minimal paperwork and regulatory requirements: Sole proprietorships involve less paperwork and regulation than other business structures.

Cons

• No personal liability protection: Other business structures can shield you from personal loss. A personal proprietorship puts your assets at risk if things go badly.

• Limited ability to raise capital: As a sole proprietor, you’ll have to take on the sole responsibility of raising capital. You can only raise as much as lenders will loan you as an individual. 

• Business credit: Building business credit can be tough as an individual, as your personal finances can get in the way.

Want to learn how to set up a sole proprietorship?

Read our article on how to register a legal entity for your OnlyFans agency.

Partnership

Partnerships are great if you're starting your agency with a co-founder or multiple partners. 

To succeed, choose partners whose skills complement yours.

Also, agree on roles, responsibilities, and profit sharing.

Let's explore the two main types of partnerships for OnlyFans agencies:

1. General Partnerships

• All partners share responsibilities and liabilities

• Each partner can make decisions that bind the entire agency

• Ideal when all partners are actively involved in day-to-day operations

• Example: Two partners where one manages creator relationships while the other handles marketing and growth

2. Limited Partnerships

• Some partners have limited liability and involvement

• At least one general partner maintains full liability and control

• Better for partners who want to invest but stay hands-off

• Example: A managing partner runs daily operations with silent partners who only provide capital.

Pros

• Easy and inexpensive to form: This business structure is light on paperwork and forms. You can enter into a partnership simply by agreeing to go into business with another person.

• Shared financial burden and workload: A single business is easier to manage with multiple partners. 

• Combined expertise and resources: Each partner can focus on their strengths. One might excel at finding and managing Creators. Another might handle technical aspects. A third partner might manage finances.

• Flexible management structure: Partners can structure management as they choose, especially if they create a clear and well-defined partnership agreement.

• Pass-through taxation: Like with sole proprietorships, partners report their share of profits on personal tax returns.

Cons

• Shared liability: In a general partnership, each partner could be personally liable if a Creator or client sues the agency.

• Conflict between partners: Disagreements about Creator management, revenue sharing, or growth strategies can create serious business conflicts.

• Slower processes: Shared decision-making can slow things down, even with only two decision-makers.

• Shared profits: Profits must be shared in a partnership.

Limited Liability Company (LLC)

LLCs are often the best structure for OnlyFans agencies. They are flexible and protect against liability.

If your agency is managing finances, content, and contracts for multiple Creators, an LLC will protect your personal assets from any legal or financial issues that could arise.

The owners of an LLC are called members, and the LLC is a separate legal entity from its owners.

This separation—also called the “corporate veil”—is how an LLC can shield members from liability. 

LLCs offer a lot of flexibility in how you structure your OnlyFans agency:

• Single-member LLC: Perfect for solo agency owners managing multiple creators

• Multi-member LLC: Ideal for agencies with multiple partners or investors

• Manager-managed LLC: Best for agencies where some owners are passive investors

Why legal protection matters for OnlyFans agencies matters 

The adult content industry comes with unique risks.

An LLC helps protect you from:

• Contract disputes with Creators

• Platform-related issues

• Content ownership claims

• Payment processing complications

Pros

• Personal liability protection: Your home, savings, and other personal assets stay protected if your agency faces legal challenges.

• Flexible tax options: An LLC can be taxed as a sole proprietorship, partnership, or corporation.

• Paperwork: An LLC involves less paperwork and fewer formalities than a corporation

• Flexible membership: Easy to add new partners or investors as your agency grows

Cons

• Complex and expensive: More complex and expensive to set up than a sole proprietorship. Here’s all the info you need about how much it costs to set up an LLC.

• Fees and reporting requirements: May have ongoing fees and reporting requirements (varies by state)

• Tax issues: Self-employment taxes apply to profits, and you'll need good bookkeeping to separate business and personal expenses.

Running an LLC allows you to scale your agency, and using Infloww’s CRM software can help streamline operations and manage OnlyFans Creators efficiently.

Infloww’s tools also make fan management and tracking Creators’ finances easier.

Corporation

Corporations are the most complex business structures and are usually reserved for larger agencies with plans for significant growth. 

If you’re looking to bring in investors or issue stock, a corporation might be the best choice for your agency. 

For example, if your agency plans to expand internationally or bring on high-profile Creators (top 0%), incorporating may be necessary to accommodate this growth.

What is a corporation?

• It's a legal entity that's separate from its owners, known as shareholders. 

• Corporations are owned by shareholders who purchase stock in the company. 

• This separation allows the business to enter contracts, own assets, and engage in transactions independently of its owners.

• These shareholders elect a board of directors to oversee major business decisions. 

• This structure creates a clear separation between ownership, control, and management of the business.

C-Corporations vs. S-Corporations

Let's explore the two main types of corporations for OnlyFans agencies:

1. C-Corporation

• Ideal for large-scale operations

• Unlimited number of shareholders

• Can sell stock to raise capital

• Perfect for international expansion

• Example: An agency managing hundreds of Creators across multiple countries

2. S-Corporation

• Limited to 100 shareholders

• Must be U.S. citizens/residents

• Pass-through taxation

• Example: A growing domestic agency with multiple investor-partners

Pros:

• Maximum liability protection: Essential when managing high-profile creators and large content portfolios

• Easier to raise capital: Can issue different classes of stock to attract various types of investors

• Business continuity: Your agency continues even if ownership changes

• Tax flexibility: Multiple strategies available for optimizing tax situations

Cons:

• Highest setup and maintenance costs: Expect to spend several thousand dollars on formation and annual compliance

• Complex regulations: Requires detailed record-keeping and regular board meetings

• Double taxation: C-corporations face taxation at both corporate and shareholder levels

Choosing the right structure for your OnlyFans Agency

When deciding on the best legal structure for your OnlyFans agency, consider the following factors:

• Size and growth plans: A sole proprietorship or LLC would be best if you start small and plan to remain that way. 

• Liability concerns: The adult content industry can be legally complex. If protecting your personal assets is a top priority, an LLC or corporation is advisable.

• Tax implications: Consult with a tax professional to understand how each structure will impact your tax obligations.

• Complexity and cost: Consider your willingness to deal with paperwork, reporting requirements, and ongoing fees.

• Funding needs: A corporation might be necessary if you plan to seek outside investment.

• Location: Some states have more favorable business laws and tax structures for certain entity types. Research your state's specific requirements and benefits.

Conclusion

Forming a legal entity is an important step in protecting your OnlyFans agency and ensuring long-term success. 

Whether you choose a sole proprietorship, LLC, or corporation, make sure you understand the legal and tax implications of your decision.

As your business grows, you can always reevaluate and change your structure if needed.

Remember, while this guide provides a comprehensive overview, it's always best to consult with legal and financial professionals familiar with your local laws before making a final decision.

They can provide tailored advice based on your specific circumstances and goals.