How to Start a YouTube Business

Decide Whether the IRS Would Call This a Business or a Hobby

Before registering anything, know that the IRS applies specific factors to decide whether an activity is a business (operated to make a profit) or a hobby (pursued mainly for enjoyment, without profit intent). Per the IRS, relevant factors include whether you carry out the activity in a businesslike manner with accurate records, whether you depend on the income for your livelihood, whether you've been profitable in similar activities before, and whether you've made changes aimed at improving profitability. If the IRS would call it a hobby, income is still reported, on Schedule 1, but business expense deductions work differently than they do for a business.

Register a Business Structure Once It's a Business

Once the activity is run with profit intent, treat it like any other business: choose a structure, such as a sole proprietorship or an LLC, and if you're an LLC or corporation, file the formation paperwork with your state. See our guide on how to choose a business structure for the tradeoffs, particularly around liability if a video or sponsorship ever leads to a legal dispute.

Get an EIN and Pay Self-Employment Tax

Apply for a free EIN from the IRS once the business is formed; it's typically issued immediately online, and it's generally needed to open a business bank account. Per the IRS, anyone with net self-employment earnings of $400 or more, including ad revenue, channel memberships, sponsorships, and affiliate income, must file Schedule C to report the income and expenses, and Schedule SE to calculate Social Security and Medicare tax on the net earnings. Because none of this income typically has tax withheld the way a paycheck does, use Form 1040-ES to make quarterly estimated tax payments rather than owing a large, penalized amount at filing time.

Disclose Sponsorships Under the FTC's Endorsement Rules

Per the FTC's Endorsement Guides, if you have a material connection to a brand, whether payment, free products, or another benefit, in exchange for featuring it, you must disclose that connection clearly and conspicuously: placed where viewers will actually see it, in plain language, and visible before they decide whether to keep watching or engage. Responsibility for proper disclosure falls on both the creator and the brand, so relying on the brand to handle it isn't a safe assumption.

Follow COPPA if Any Content Is Directed at Children

Per the FTC, the Children's Online Privacy Protection Rule applies to any site or service, not only ones built specifically for children, that knowingly collects personal information from users under 13. If your content is directed at children, or you know children are a significant part of your audience, review what data your channel or any linked site collects and whether verifiable parental consent is required before collecting it.

Protect Your Channel Name and Keep Records

If your channel name functions as a brand you want nationwide protection for, a federal trademark through the USPTO is a separate, optional filing beyond simply registering a business name. Keep records of every revenue source and expense from the start; see our guide on how to set up small business bookkeeping for what the IRS expects you to retain and for how long.

Hobby Income Is Still Taxable, Just Treated Differently

Even if the IRS would classify the activity as a hobby rather than a business, the income still has to be reported; the hobby classification changes how expenses are deducted, not whether the income itself is taxable. Don't assume a smaller or occasional channel is automatically exempt from reporting its income.

A Sponsorship Disclosure Has to Be Genuinely Visible

The FTC's guidance is specific that a disclosure buried at the end of a long description, or lost among dozens of hashtags, doesn't meet the clear-and-conspicuous standard. Place a sponsorship disclosure where a viewer will actually see it before or during the relevant content, not just somewhere on the page.

COPPA Compliance Is an Ongoing Practice, Not a One-Time Check

As content and audience evolve, periodically reassess whether your content or a meaningful part of your audience is directed at children, since this determination can change as a channel grows or shifts focus. Treat this as a recurring review, not a single decision made once.

Multiple Income Streams Can Each Have Their Own Rules

Ad revenue, sponsorships, affiliate links, and merchandise or digital product sales can each carry different tax or disclosure obligations. Track each revenue type separately in your bookkeeping so you can apply the right treatment to each one at tax time.

This Is Not Legal or Tax Advice

Whether a specific activity is a hobby or a business, and how COPPA or the endorsement rules apply to specific content, depend on the facts of your situation. Talk to a tax professional about your specific income and an attorney about any content aimed at or popular with children.