There is nothing that can protect you from being sued – this is America and anyone can sue anyone over anything. Getting things tossed is expensive.

And, despite incorporation, people will sue you personally, especially if you are the corporation, which would be the case of a porn performer or an independent director or producer. There are some states where corporations get extra protections, such as Delaware and South Dakota. As far as I know, not a lot of porn is produced in those states.

@Lacey

Mileage and co-mingling were two large issues hubby and I struggled with…me trying to convey CPA advice…he had to use that Dome mileage book for every leg of the trip and either use his corporate card (preferred) or cash for EVERY business purchase. The biggest was…save the receipt!

He used to drive me crazy using personal card/cash and pitching receipts for business meals & entertainment. It has taken years but now he’s totally on board to the point where he sends new shirts for embroidered logo so he can write off cleaning and learned the value of using his calendar to record attendees and a brief mention of what was discussed.

The trick was having him meet with CPA who explained that the receipts he was pitching could have paid for our last vacation with proof. 🙂

@BT

The difference between ala carte coverage and the umbrella was almost as ridiculous as the amount of coverage we ended up with…until hubby called his dad who sold insurance for 40 years and got told…up it if you can, this isn’t a place to skimp.

Our friend wound up losing nearly half a mill by the time all was said and done. Lacey can explain why he has to wait to declare the legal expenses as a bad debt to write them off. Despite knowing he was throwing good money after bad it cost him nearly 20k (with travel and local counsel costs) for the judgement against the pro-se litigator. (Once the appeal affirmed lower court the plaintiff, now defendant attorney advised but didn’t represent for the separate suit suing for fees) his policy was exhausted within the first year of the three year battle that included defending his win at the appellate level where it was affirmed.

Too many people think lawyer charges expenses plus $ per hour but don’t stop to consider that this is just one expense of a protracted lawsuit. He had fees for CPA, experts and witnesses on top of travel, lodging and meals for them and lawyer needed to hire local counsel and bring assistance.

Before they even got the point of depositions he had to hire someone to keep things afloat during his many absences.

Btw…he learned real quick that the IC contract he had what he considered a very smart lawyer draw up didn’t do squat to protect him from this suit. He appealed judges ruling against the arbitration and secondly that even if arbitration were called for the scope of litigation didn’t fall within the bounds of the contracted duties.

Be very careful who you sleep with, more careful who you discuss (or brag about) business matters with and even more careful who you give gifts to. The half mill doesn’t include the expenses of keeping his wife at his side to defend this suit or the cost of the crow he’ll be eating for many years to come 🙂

The premiums were so ridiculously high that I decided to pass. As it turned out, each of the three lawsuits I was involved in, including one that went all the way to trial, also involved the publisher who retained me and the publisher provided my defense and covered all of my expenses related to the suits, including living out of a hotel in Harrisburg, Pennsylvania for six weeks during the one case that went to trial.

For a porn production company, especially a small producer, or a director, I would think that a personal liability policy in addition to business liability would be essential because of what we’re talking about – a disgruntled performer argues that he or she contracted an STD on your set; was injured because of something that you asked them to do something that wasn’t safe; that their lives were ruined by porn – who knows. If you’re a production company or a director who has a commercial business policy, you might also check to see if it includes personal liability. In addition to my freelancing career, I have also been a partner for 30 years in a retail business. Our business insurance policy includes $1 million in personal liability. Similarly, I own some rental properties and have landlord insurance, which includes personal liability. Neither of those policies would have protected me in my media business but for my other activities it was there. And, if you qualify for a commercial policy, its a cheap way to get personal liability.

I would doubt a performer could get a commercial policy, but a producer or a director who also runs a set could.

I just think its important for people incorporating to understand that they are personally off the hook, especially if they are the business and pay out all of the business profits to themselves. If you’re sued, you’re going to be sued personally. You need to protect yourself to the extent you can.

Good move on your part, Lurking. Attorney’s fees for a defense cost a bundle especially if it goes to trial. Just because there is a corporate veil doesn’t mean some asshole won’t attempt to go after personal assets as well, a corporate owner will avoid personal liability 95% of the time (the other 5% is gross negligence by the owner or an owner’s agent generally) but the cost of attorney’s fees and court costs to use that corporate veil can be great ($100K+ in a worst-case scenario). Certain businesses almost require a corporate structure to insulate a person’s personal assets (a bar or other place of entertainment comes to mind) because of the risk of lawsuit (drunk driving accident where the drunk driver last drank a half hour before the accident at your bar as an example).

Also good move hiring an attorney with knowledge of tax and insurance implications. Usually you end up with an attorney, CPA or other accountant and insurance agent all chiming in as to what they think you need leaving you to figure out who has your best interests at heart.

Thanks for this great summary!

We went the extra mile to do an S-corp after initially deciding an LLC would suffice until we met with attorney who explained the legal, tax and insurance details specific to our situation that would be best offset with the s-corp.

That reality aside from the “sounds like a great idea” add-on products pushed at consumers of DIY legal sites made us very glad to have pursued appropriate advice so we didn’t waste money and time on a corporate structure that may have cost us much more down the road than the savings we hoped for or anticipated by going with a simple LLC.

BT raised the second (after taxes) big issue we struggled with …personal liability concerns. Our primary issue was protecting personal assets and our home until lawyer and insurance agent explained the insurance benefits related to each corporate structure. We ended up with some type of umbrella policy with a ridiculously high coverage that includes the same legal defense coverage if personally named as well being named as a corporate officer/employee. This was paramount to us at the time as a friend who won a suit against them personally and professionally was stuck with the personal defense tab despite winning a judgement for legal expenses from the deadbeat who thought they might be a good meal ticket.

I can’t wait for Lacey’s response to this one. I also didn’t even know that you could have a pussy and ass tightened so this one is new to me (I am male, not a porn performer, don’t have a pussy and my ass is for pooping only so I won’t be availing myself of that procedure). I would have to say (I also have an accounting degree) if you can prove that the procedures were instrumental in getting you more work that you would have a decent case for deducting the expense. The problem is proving to an IRS auditor that the procedures actually allowed you to get more work and that it wasn’t just a personal choice.

You have a better case regarding the “feminine odor products” as a person will not work with someone with a fishy smelling pussy. However, I encourage you to get to your doctor to get this treated as you probably have bacterial vaginosis which can be treated with medication quite quickly (and the medication would be deductible in this instance as well). A woman should rarely need “feminine odor products”, adult industry or not. For the record this is so common that Vivid actually keeps douches (and Fleet enemas which are also deductible if you have to purchase them — I can see a need for those if a woman is doing anal) on set for their performers so please help Nina Hartley (who I got the info from via an AIM video) spread the word about bacterial vaginosis.

It is a no-go on the attorney retainer fees for escorting as the practice is illegal in all 50 states (Nevada allows for prostitution houses in some areas of the state but not escorting). However, if you do
“legitimate” adult industry film production as well an attorney retainer for that would certainly be deductible. Nothing to do with tax but I also suggest not taking clients in NYC — Rikers jail (actually an island with nine jails on it IIRC) is a house of horrors and if you get arrested for prostitution that is where you would be held. Los Angeles women’s jail is also very dicey regarding women’s comfort and safety. Good luck whatever you end up doing.

EDIT: I see Lacey’s response. Whether I responded to a troll or not the issues are real so my answer stands.

@Yurizan –
At least you’re a funny little troll…
I’m a HUGE fan of sarcasm. Keep up the good work. 😉

How about for having a attorney on retainer for possible
prostitution arrest matters if I am busted for escorting in
New York through one of the escorting agencies I work for?
Can I deduct for that?

Incorporating does give you some liability protection. This may vary by state, but as a rule, if someone sues you they will sue both your LLC and sue you personally. Again, it may vary by state but …. I live in New Hampshire. I’ve been sued a couple of times in my professional capacity – which is media related although not porn – in federal court. Plaintiffs in Washington, D.C., Virginia and Pennsylvania. In all of the suits, the actions were filed against the media organization that contracted with me to do the work, all of the editors who worked on the projects were sued personally, and I was sued corporately and personally. In all three instances, the courts allowed them to go forward. We won all three suits, so whether a judgment would’ve been entered against me personally or corporately is hard to say, but the courts did allow the plaintiffs to sue me personally even though I was incorporated.

Lacey makes a great point about quarterly payments. It’s important for self-employed folks – whether they are incorporated or not – to remember that regardless of deductions, they are responsible for the full 15.3% self-employment tax that covers social security and medicare, up to the first $117,000 and then 2.9% on your net income in excess of $117,000. This can be a shock to individuals who have always drawn a paycheck where their employer paid half of the social security and medicare contribution. So …… a safe bet is to put aside about 33% of your check to cover the self-employment tax and your income tax responsibility.

Last ….. if you’re self-employed – again regardless of your incorporation status – you should investigate SEP and SIMPLE IRA’s for retirement contributions. These are 401K’s for the self-employed.