Asset Protection For Social Media Influencers

Dec 14, 2023
Asset Protection For Social Media Influencers
The creator economy has entered a new phase of maturity, with the addressable market for creators and influencers estimated at around $250 billion in 2023, a figure projected to almost double over the next five years, according to Goldman Sachs. This explosive growth, driven primarily by short-form video platforms like TikTok, has also brought about a surge in legal challenges faced by influencers. Recent high-profile lawsuits underscore the legal risks inherent in this burgeoning industry.

The notorious Fyre Festival scandal emphasized how potential liability for misleading advertising can propagate unpredictably, as the scandal left influencers entangled in lawsuits years after the event.

Influencers Face Unique Challenges And Business Crises
The influencer market is highly fragmented by nature. Powered by individual entrepreneurs, the market does not have a singular blueprint for success. Creators who become monetized influencers are often mavericks, inventing new business strategies as they seek to produce profitable content and partnerships. These mavericks must adapt often—and pivot quickly—to remain relevant amid changing platform algorithms, trends, tastes and competition.

Because of the idiosyncratic nature of their businesses, influencers grapple with a range of unique legal challenges, including defamation claims, copyright infringement and privacy invasion lawsuits. Their high visibility and public persona make them attractive targets for legal action, with potentially significant financial implications. The ever-present threat that their online fame could prove transient and the scrutiny of a global audience exacerbate these challenges, underscoring the need for effective crisis management and legal protection.

The Value Of Asset Protection
Amid the maturing market, creators are becoming increasingly savvy in their business decisions, advocating for higher-quality platforms, utilizing advanced engagement and reach analytics and diversifying their income streams. However, influencers remain underserved by the professional services sought by traditional businesses, including professional financial and legal advice. Unlike traditional advertising firms that have dedicated CFOs and legal teams, influencers are often left to make highly consequential business decisions on their own.

Meanwhile, the number of these emerging businesses is accelerating. Today, there are an estimated 50 million global creators, and about 4% are generating six-figure revenues. These numbers are expected to grow 10%-20% a year, meaning hundreds of new professional influencer businesses will be created each year over the coming years. The need for robust financial and legal protection for the influencer market is only going to grow.

Given the inherently risky nature of their career, social media influencers should consider asset protection planning as a means to secure their growing wealth in an unpredictable industry. The highly public, highly scrutinized nature of their work heightens their susceptibility to legal action. Asset protection can help provide peace of mind and financial security, ensuring that the fruits of their creativity and engagement remain intact amid any unforeseen adversities.

What Asset Protection For Influencers Entails
Influencer asset protection is a legal strategy designed to safeguard their wealth and assets from potential legal risks, including lawsuits, creditors and divorce. An attorney can assist influencers in structuring an asset protection plan that makes sense for the influencer’s business and meets their personal goals.

Generally, conducting a risk assessment is the first step toward creating a plan. This step includes a comprehensive assessment of the influencer’s assets, income sources and potential legal vulnerabilities. Then, based on the influencer’s long-term financial and business goals, the influencer may be advised to create new legal entities to hold certain assets. Influencers may need help setting up appropriate business entities, such as LLCs. They may also have significant intellectual property that requires protection.

In many cases, the establishment of trusts is recommended to solidify the asset protection plan. Domestic and offshore asset protection trusts can help shelter assets from potential legal claims or creditors. Trusts can take several forms, and an attorney can help an influencer determine which trust structure would be most appropriate from the perspective of risk management and long-term goals.

Asset Protection Is Not Exclusively For The Ultra-Wealthy
A general heuristic is that individuals with over $1 million in assets may benefit from a formal asset protection strategy. Influencers should keep in mind that their assets aren’t as simple to determine as adding up their bank accounts. Influencers aren’t just earning a salary. They are building equity in a business and trying to grow that revenue over time. A business with annual revenues of six figures is worth protecting—particularly when the business is based on the influencer’s own likeness and personal brand—which cannot be easily replicated or repaired if something goes wrong.

Influencers should understand the benefits of a proactive approach to asset protection. Asset protection is considerably more effective when implemented before trouble arises (either through the emergence of a lawsuit or claim). Engaging with legal counsel early can significantly mitigate risks and lay a strong foundation for a long-term, successful influencer career.

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Source: forbes