What is a loan-out corporation?
A loan-out corporation is a company set up as a separate legal entity, usually for an actor, recording artist, or other individual, for the purposes of using the loan-out company’s corporate legal protection. In addition to the corporate entity’s protection, there can also be tax advantages to setting up a loan-out corporation to be paid through.
When an individual sets up a loan-out, they are then an “employee” of their own corporation and the corporation “loans out” the services of that employee to employers, this is where the term “loan-out” comes from. Hiring a loan-out can save the production company money because they will not have to pay the payroll taxes for that individual. The production company, or the payroll company they hire, makes the check payable to the loan-out company instead of to the cast or crew member. Since the worker is an employee of the loan-out company, it is the responsibility of the loan-out company to pay any applicable payroll taxes.
It is always important to seek professional advice from your CPA or tax advisor if you are considering setting up a loan-out company. When hiring and paying a loan-out, you will need their completed W-9 form and articles of incorporation.