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Why Your Favorite Celebrity is a Corporation

Why Your Favorite Celebrity is a Corporation | by TaxACT

Have you ever wondered about how the movie business works?

For your sake, I hope you never find out.

Learning the secrets of the entertainment industry is like waking up every morning and finding out that the Easter Bunny killed Santa in a bloody fight to the death, and both of them were figments of someone else’s imagination to begin with.

It leaves you feeling a little dead inside.

But back to the movie business: as little as it seems like anyone is actually doing any real work in the industry, it’s not made up entirely of unpaid interns and “slashies” (actor/model/waiter).

There are a select few in Hollywood who earn impressive paychecks for (usually) impressive acting.

And like any other person making money, it’s not how much you make, it’s how you manage it.

The Power of the Loan Out Corporation

As New York Magazine revealed in its Celebrity Economy feature, nearly every actor of any prominence funnels their earnings through a loan out corporation.

This corporation is used to place a lower tax rate on the celebrity’s earnings than if the earnings had simply been provided directly to the individual.

She’s not Kim Kardashian, she’s Kimsaprincess, Inc! That’s not Mindy Kaling, your favorite former Office writer turned lead-actress-in-a-sitcom, that’s Kaling International.

The reason why these corporations are interesting is that they show actual financial planning on the part of celebrities. Of course, it’s their CPA or business manager handling the details, but still.

Do you think you could benefit from a loan out corporation?

Maybe, although the structure is really ideal for individual entertainers, especially when they may only receive just a handful of large payments in the course of the year, which means that money needs to be handled in the most tax-advantageous way possible.

Other Time-Honored Celebrity Money Tricks

Celebrity is fleeting.

It doesn’t feel that way when I see Snooki from the Jersey Shore for the 8,000th time in the headlines of my Google News feed, but it is.

Pop culture is a relentless vulture, and savvy figures in the limelight will take full advantage of their time at the top.

Using their loan out corporation, they will secure contracts for endorsements, appearances and sponsorships that are often more lucrative than their acting fees. Musicians make most of their money on tours and merchandise, not albums.

Lesson learned for us average folks?

Find out what skills or opportunities you can leverage and you may be surprised to see what it turns into.

Don’t think you need to specialize in only one thing to be successful.

I’ve seen success come to people in many different forms. We don’t all have the same path to follow.

And always use a trusted accountant when the money starts coming in!

Image Source: Indabelle

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About SK

SK is the author of American Debt Project - Pay Off Debt and Live Your Life. Don't Compare, Contrast. Follow American Debt Project on Twitter andFacebook.