General
Business Entity Protections and Obligations for U.S. Professional Esports Talent and Companies: 8 Things to Know
Individuals and companies in all industries form and utilize business entities for a variety of unique benefits and protections. In fact, a separate business entity, such as a corporation or a limited liability company (LLC), may be established by a professional gamer, streamer, content creator, caster, or any other party working in the esports space or on behalf of gaming talent in the United States. The selection of which business entity to form is an initial crucial decision. Whether the individual forms a C-Corporation, a S-Corporation, or an LLC (or some other entity type), typically depends on which state the vehicle will be formed in and which jurisdiction the owner permanently resides in or has a steady physical residence unless a registered agent is utilized. Accordingly, it is prudent to consult with a qualified professional, such as an attorney and/or accountant, when deciding which type of business entity and which location is proper for a particular individual. This determination is important because each state has its own benefits, drawbacks, specific costs, and maintenance requirements which all may be relevant factors in a business owner’s decision.

Table of Contents
1. Business Entity Types and Location Selection
Once the U.S. state and the proper business entity are designated, such as a corporation or a limited liability company (LLC), the gaming talent, business owner, or independent representative must file the necessary incorporation or formation documentation with the selected state’s department of corporations or other similar governmental department (which differs in each state). In fact, many gaming talent and companies in the professional gaming industry have already established formal business entities to operate and conduct business from including formulating both corporations and LLCs in a variety of states.
For instance, popular gaming influencer Tyler “Ninja” Blevins created a Delaware Limited Liability Company, “Ninja Holdings, LLC.”[i] Similarly, professional gamer Michael “Shroud” Grzesiek operates a California Corporation which owns several of registered trademarks, “Shroud, Inc.”[ii] In addition, notable video game streamer Benjamin “DrLupo” Lupo owns a Delaware Limited Liability Company, “Lupo Creative, LLC.”[iii] Finally, professional gaming organization, One True King (OTK) own and operate a Delaware corporation, “OTK Media, Inc.”[iv]
2. “Loan-Out” Companies and Personal Asset Protection
Generally, business entities created on behalf of a specific individual are referred to as a “loan-out” company. These loan-out companies typically enter into a contract with a third-party on behalf of the talent as part of a loan-out agreement. Accordingly, the business entity licenses and sells the gamer’s services and “name, image, and likeness” rights to other companies including monetizing the talent’s endorsement, competitive gaming, creative, marketing, or any other agreed upon services.
Consequently, one important advantage that an entity provides to its owner is shielding their personal assets from any claims arising from any contracts or other arrangements entered into by the loan-out company. For example, this protection might apply to any cars, real estate, houses, stocks, bonds, securities, bank accounts, or any other assets owned by the individual gaming talent. This unique benefit means that the corporate entity, not the owner of it, would conceivably be liable for any debts or contractual obligations of the business so that creditors generally cannot recover against the owner’s personal assets.
Essentially, if an individual properly entered into the original deal on their behalf through their loan-out entity, then a sponsor, a league organizer, or some other third-party creditor who desires or possesses an existing claim or cause of action against an individual might only be apply to recover a judgment or debt from the business entity and its assets (which might be minimal to nonexistence) and not directly from the individual owner and their personal assets (which might be substantial).
3. Forming a Corporate Bank Account and Obtaining an Employer Identification Number (E.I.N.)
While shielding an individual proprietor from personal liability is one of the most significant advantages of creating a limited liability entity, there are also several other important benefits that an entity provides its owner. For instance, the existence of a registered entity enables the owner to open a business bank account in the company’s name.
Accordingly, the use of this type of bank account facilitates the easier tracking and payment of expenses and permits the deduction or “writing off” of relevant, properly documented business expenses. These expenditures might include the cost of the equipment to record and stream the gaming content as well as the amounts paid for marketing or promoting their streaming channel or created content (i.e. Instagram “boosts” or paid advertisements).
Similarly, a gaming talent might attempt to recoup the costs of any video recording or editing software used to create the final content as well as any amounts associated with data storage or transmission of the gaming stream or media, such as internet access or “cloud” costs. Also, any associated expenses incurred during a gamer’s business trip or competition may also be deductible, such as hotel, flight, food, and drinks costs. However, it is important that an owner is cautious in the usage of the business bank accounts to ensure that they separate business funds from any personal ones and do not comingle them.
Additionally, the creation of a formal business entity permits the company to receive an Employer Identification Number (“E.I.N.”) also known as a Tax-Identification Number (“Tax-Id”) in the United States. In essence, an E.I.N. is analogous to the company’s social security number and it is beneficial to obtain it because many third-party companies and businesses require this information to compensate the individual as opposed to paying the person directly. Finally, a valid business entity also permits the owner to obtain any potentially required business licenses and insurance that might be needed so that they can operate efficiently and legally.
4. Use of Operating Agreements and Shareholder Agreements for Ownership and Investments
Another benefit for a business owner is that a limited liability entity such as a corporation or an LLC is typically governed by a written contract that outlines how the entity will operate and who owns it. For example, this document is referred to as an “operating agreement” for an LLC and as a “shareholder agreement” for a corporation. Consequently, these documents may be utilized when there are multiple owners of one entity.
While the substance of these agreements differs, they generally include an outline of the split of any profits and losses of the business among its owners as well as specifying how any management decisions are addressed including describing the process to add or remove an existing or prospective owner.
As a result, the creation and execution of this type of document provides the business owner with flexibility to potentially bring in outside investors and third-party investments into the entity from additional business partners who all act as owners of the single entity. In fact, these controlling documents enable each different owner to receive varying percentages and ownership interests in the company as agreed upon by the parties in the writing.
5. Management and Licensing of Company’s Intellectual Property (IP) and Tangible Property
Furthermore, the existence and creation of a corporation or an LLC provides for the easy management and licensing of any creator-owned intellectual property to third parties including the talent or company’s trademarks, copyrights, patents, trade secrets, and any other confidential business information. Similarly, the entity could also own or lease tangible property such as computer and gaming equipment, real property, and potentially even secure a business loan or other lines of “credit” through the business. In addition, the existing entity can invest in other companies and businesses to possess ownership interests in them to act as a “holding company” for the gaming talent.
6. Maintenance Requirements and “Piercing the Corporate Veil”
While business entities provide numerous benefits to their owners, there are potential ways a third-party can “pierce the corporate veil” and disregard an existing corporate entity’s protection of its owners. Accordingly, this action would enable a creditor to attempt to attach and recover any owed debts from an individual’s personal assets instead of solely retrieving them from the company. However, to mitigate this potential risk, it is essential that the company owner follows any and all statutory procedures and guidelines which differ in each state. For instance, it is vital that the entity is only utilized for a proper business purpose, and it is not just merely utilized as a shield from personal liability.
Additionally, the owner must adhere to all mandated statutory formalities which might include the preparation of annual corporate minutes to ensure the entity is a real functioning business. Furthermore, some states may have distinct requirements that must be followed to keep an existing corporation or LLC active. For instance, some jurisdictions mandate that an entity prepare and file an annual or biennial statement or similar yearly report.
These maintenance filings would be in addition to any initial ownership document as well as a company’s yearly corporate tax obligations. Consequently, if an owner fails to timely submit any required document, then the proprietor may be subject to late fees and penalties assessed by the government or even potentially having their entity dissolved and ruled inactive.
7. Corporate Transparency Act Obligations for New and Existing Corporation and LLC Owners
Finally, as of 1 January 2024, the Corporate Transparency Act (“CT Act”) established new obligations for all current as well as prospective U.S. business entities. Specifically, the Corporate Transparency Act created new requirements for all existing as well as any new and foreign businesses operating in the United States. In particular, the law applies to all non-exempt corporations, limited liability companies (LLCs), and any other formal business entity created and operating in the country.
As a result, the owners of any existing company must comply with this statute by filing a Beneficial Ownership Information (“BOI”) report with the Financial Crimes Enforcement Network (“FinCEN”). While there are some professions that are excused from this additional filing requirement, the owners of a non-exempt entity who fails to timely comply with and file the required BOI report may be subject to potential fees and criminal liability including a possible “USD 500” a day financial penalty.
Since most “loan-out” companies and other service-driven esports professionals operate entities that generally do not qualify for any of the enumerated statutory exemptions, it is crucial that any currently existing corporations and LLCs as well as any individual intending to create an entity in the future prepare and submit the necessary BOI report prior to the mandated deadlines to avoid potential financial penalties and other potential liability.
8. Beneficial Ownership Information Reporting Deadlines
Specifically, this law requires that any business entity that existed prior to 1 January 2024, must file an initial Beneficial Ownership Information report no later than 1 January 2025. An owner’s failure to timely and properly file the BOI report by deadline may result in them being charged a monetary penalty of USD 500 per day. Additionally, any company created or registered on or after 1 January 2024, but before 1 January 2025, must file the mandated BOI report within 90 calendar days of the entity’s registration date. Finally, any business entity formed on or after 1 January 2025, is required to submit a BOI report within 30 calendar days after the entity is created.
Accordingly, the statute requires a business owner to submit information on all the company’s “beneficial” owners as well as for any third-party entity or “company applicant” that filed and established the entity on their behalf.
A BOI report includes information on all the “beneficial owners” of an entity as of the time of the filing. In particular, a party must submit an image of an approved “identification document” such as a valid U.S. passport or U.S. driver’s license along with a listing of every owner’s full name, date of birth, and residential address. Furthermore, any new entity that is created on or after 1 January 2024, is also required to file a company applicant’s report in addition the mandated BOI report.[v]
Accordingly, a reporting company is required to submit this additional filing which contains information on the filing entity’s legal name, the current address of the company’s principal place of business, the state of the filing party, and the entity’s E.I.N..
However, it is important to note that any entities formulated prior to 1 January 2024, do not need to file a company applicant report but they must still file the initial Beneficial Ownership Information report by the above deadline. In contrast to state annual reports or biennial statements, there is no annual BOI reporting requirement under the CT Act. Instead, a non-exempt reporting company must only file additional BOI reports whenever the company’s submitted information needs to be updated or revised, such as through the inclusion or removal of a listed beneficial owner from the entity.
Conclusion
In conclusion, there are many benefits and protections that professional gamers and businesses operating in the esports space might obtain by establishing a formal business entity. In addition to the personal asset protections provided by a corporation or an LLC, the ability for the owner to easily license and manage any owned intellectual property as well as physical assets provides additional value for a gaming talent or company working in the professional video game industry.
Accordingly, in order to secure and maintain the protections provided by these limited liability entities, all business operators must ensure that they comply with the Corporate Transparency Act provisions as well as follow any yearly or periodic filing requirements mandated by a state including preparing corporate minutes, annual reports and Statement of Information documents. As the industry continues to evolve and expand, the importance of proper business practices becomes increasingly crucial to the success of any professional gamer or esports business.
[i] < Ninja Holdings, LLC>, Del. LLC File No. 7002096.
[ii] < Shroud, Inc.>, Cal. Corp. Entity No. 4529193.
[iii] < Lupo Creative, LLC>, Del. LLC File No. 7094676.
[iv] < OTK Media, Inc.>, Del. Corp. File No. 3573076
[v] 31 CFR § 1010.380(b)(2)(iv). (https://www.fincen.gov/boi/small-entity-compliance-guide)