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What is a loan out corporation?
A loan out corporation is a company (such as corporation or LLC) that is set up as a separate and 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 are tax advantages to the individual who sets up a loan out corporation.
Typically, the actor is then an "employee" of his own corporation and the corporation "loans out" the services of that performer to the production company. This normally saves the production company money because they will not have to pay the "employer" portion of the payroll taxes for that performer.
The reason being is that the Production Company (or Payroll Company) makes the check (for the performer's services) payable to the loan out company, NOT the performer. Since the performer is an employee of the loan out company, it is the responsibility of the loan out company to pay an applicable payroll taxes.