Escort business: Do I want to be a Corporation?

I’ve been running or responsible for an escort service for a while now, and want to expand my business and bring in outside investors.

Business has been going well, but I want to be able to expand without taking on the personality financial responsibility should anything go wrong.”

I want to start an escort company on a grand scale in my state, and want to bring some high-powered people in to join me.”

If these statements are true to you—all power to you. The United States is not a kind country when it comes to supporting the escort industry. Many services avoid paying taxes simply because there are no clear guidelines as to how escort services fit in the legal world here. But it is extremely important to register an escort service and pay taxes on the profits made. And if your business is expanding to such an extent that you want to take on investors and have a sound handle on your finances, then this is the option for you.

In a corporation, the business is a legal entity owned by shareholders—those who have bought one or more shares of stock in the business. While the shareholders may invest money and collect in profits, they are not responsible for losses and if the corporation goes bankrupt the individuals are not responsible. They only lose the money they invested into the company, nothing more.

A corporation is also its own legal entity that can sue and be sued—along the lines of the BP oil spill. British Petroleum is being sued by countless individuals and organizations. But while those who ran BP are responsible for the spill, it is the corporation that is getting sued and assuming legal responsibility. Those individuals may suffer career and personal conflicts, or be sued by BP for negligence, but the corporation takes on the degree of guilt and debt.

Setting up a corporation requires much more paperwork, as it is regulated by federal, state and sometimes local governments. It also requires a greater initial investment, as startup fees and taxes are higher for corporations. This is only a sound choice if opening a large escort service where initial investments are ample, office space may be rented, multiple employees are hired on salary, and records are kept and filed regularly. You’ll need to hire accountants and (most likely) a lawyer.

If you still think this is the option for you, here are the steps to getting started.

The Steps to Starting A Business: A Corporation

  1. Research and Articulate Your Business: If you are planning on starting a corporation, you should already have a sound grasp of the field into which you are about to become a major player. Asking yourself questions such as: “is there a need for this in my community?”; “where is the bulk of my clientele?”; “will I be easily supported by my local government?”; “do I already know people who are willing to come on board with this company?”. If you can honestly answer those questions with positive results, then continue. However, if you think this may be too big of a step, consider forming an LLC instead.
  2. Register a Business Name: You will need to come up with a business name as a corporation. This will be filed with your articles of incorporation form, and in most states it’s required that you include “incorporated”, “corporation” or “limited” in the business name.
  3. Establish Your Board: Corporations need a board of directors, a registered agent, and initial stockholders. Those names / investments are sometimes required when filing articles of incorporation.
  4. File Your Articles of Incorporation: This is the charter by which your corporation will be run, and is filed with your state.
  5. Finance Your Business: With a corporation, you’ll need financing. Even on a smaller scale in the escort industry, where you’re not selling a product but providing a service, you’ll need some start-up funds. In larger, more public companies, these often come from investing agents like wealthy individuals and other businesses.
  6. Register for State and Local Taxes: Corporations are taxed federally, by their individual states and sometimes locally. So you’ll need to get a tax identification number for the corporation and then submit this to those entities. A disadvantage to a corporation is that the income of the corporation itself is taxed, and then any moneys shared to investors is taxed again. So the income of the company is essentially getting taxed twice.
  7. Obtain State Business Licenses and Permits: If you’re working on a small scale in the escort industry, chances are you won’t have to apply for any permits. But with a corporation, you’re going to need office space, rent equipment, get insurance etc. For more information on business licenses and permits in your state, go to Business.gov.
  8. Hire and File Employee Forms: When running a corporation, you are going to be paying regular employees. Since your business will be on a wide scale, you’ll need schedulers to connect clients and escorts, a business manager and an accountant, to say the least. So you’ll have to withhold taxes from your employees for social security, Medicaid and their income taxes. You’ll also have to pay unemployment taxes and payroll taxes throughout the year.

What are the advantages to being a corporation?

It’s honestly a little hard to say for the small-scale escort what the advantages are. Yes, you are not responsible if the company takes on debt. But if run in a responsible way on a manageable level, there is little risk in registering a small escort business. Again, we’re talking small business registration. An LLC would be more appropriate for a small business, as the liability is limited but the paperwork and management on a smaller scale.

If you are ready to expand however, here are the advantages: you are not personally held responsible should the company run into trouble, it’s a way to lure investors and employees in because you can offer stock options, and you can employ yourself within the company and take advantages of health benefits and stock options.

What are the disadvantages to being a corporation?

Corporations take a great deal of paperwork and initial funding. While it is easier now with the ease of the internet to do so online and relatively affordably, you should invest in a lawyer to see you through the paperwork mire that’s involved with setting up, especially as the escort industry is not clearly defined in certain registration processes. Also, the names of the shareholders often have to be filed with the individual state, and sometimes are made public, which isn’t a good idea if you’re looking to be discreet.

More information about opening and running a corporation can be found at Business.gov.

For a step-by-step guide on registering your sole proprietorship in your state, refer to our article How to register your small business by state.

To learn more about why you should register your business to begin with, read Don’t get busted for tax evasion: Why registering your escort business is the only option.

If you are looking to start a business only for yourself, or want to expand your business into a larger venture, refer to our articles:

Please note: SkipTheGames.com is not a legal service, nor are we tax advisors or accountants. We do offer you what we consider our best advice, but if at all in doubt, please consult a professional.