Making Passive Income From YouTube

I really like to work with my hands. It started when I was young and my parents had a wood shop in the garage… I watched my mom and dad make and fix all sorts of things around the house. It continued when I was given Legos and science kits. Fast forward and I’m now setting an example for my kids, owning a home, taking care of it, and building things when I get my mind to it. As I’ve experimented with businesses and brands I’ve come to realize that the advise that you should stay close to your passion really is true. And so, as a business owner I’ve been considering starting a DIY fix-it and DIY project brand for a while.

The vision really came out of watching Devinsupertramp on YouTube. I was an early fan and the man has created a great media company out of his dedication, hard work, and passion… on YouTube. Of course, that is a model I love and so as he has blown up, and I’ve watched others really grow their communities and turn some of them in to businesses I’ve seen myself in them.

I want to get this started so I can begin to build a community around the things I’m already doing. It is time to figure out how to structure this from a business standpoint. I have several options:

  • Own the brand personally
  • Own the brand via AssetLab, my S-Corp
  • Own the brand personally and leverage my S-Corp

So, I did what I always do when I have several options. I talked with by CPA.

Own the brand personally

The benefits here are that if it stays small, there isn’t really any need for business relationships or contracts or anything else. All the assets and accounts would be personal. The drawback is that if revenue started to roll in it would be self-employment income… a tax situation I would like to avoid.

Own the brand within my S-Corp

This is a good option assuming that the community takes off, revenue starts coming in, and I have contracts or employees to get most of the work done. Expenses are deductible. Revenues are taxed at the corporate rate. Accounts are all with the S-Corp.

Own the brand personally and license the content to the S-Corp

Now we’re getting somewhere. I hadn’t thought of this myself (this is why you want a good CPA on your team). What was suggested is that the brand could be owned personally and content could be licensed to my S-Corp for distribution. A market-typical and market-rate licensing contract would need to be created with typical business terms since Jeff Kelly and the S-Corp are different legal persons.¬†With contracts in place and accounting all correct on both the personal and business sides we realize the benefit: Licensing income is passive income.

So, Jeffrey Kelly has the possibility of earning passive income while the business handles the labor intensive part and realizes the difference between the contract and the revenue.

This is a common setup for artists that license their content to distribution companies (authors, comic strip writers, etc). However, this assumes that the artwork is complete and just needs to be shared.

I don’t really want to go that far personally. I would rather just buy the materials and assemble them and have the S-Corp handle production and distribution as part of the same agreement.

So, after some research an option presented itself: licensing live performances. In this case, the licensee handles both production and distribution while the performer (the licensor) collects the licensing fee based on the contract.

Where I’m Headed

So, a new brand is launching… a Mr Fix-It and DIY-Project community. The projects and work are handled by the person while the production and distribution are handled by the family business.