A loan our corporation is a corporation formed by an actor or recording artist or other talent who wants to do business for their personal services under a corporate entity's protection.
If you are an artist, the idea is to form a C or S corporation that would be solely owned by you and treats you like an employee that it "loans out" for work. The loan out corporation provides the artist's services, and expenses like agency and manager commissions. and legal and accounting fees, are paid for and deducted at the corporate level. The balance of the loan out corporation's income is typically paid to the artist as salary and/or bonus.
The IRS has publicly opposed loan out corporation because they can generate significant tax savings by sidestepping the oyee/independent contractor issue and being able to use deductions and shelters that otherwise would not be available. However, the IRS does not have a good track record when challenging the loan out corporation format, provided the proper formalities (e.g., maintenance of good corporate minutes and existence of an employment agreement between the entertainer and loan out corporation) have been observed.
Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship.
I would like to add to Pamela's well stated response to your question about loan-out companies that my experience is that while you must get personal advise on the issue, most accountant and other tax advisers suggest that the formation of a loan-out company is generally not beneficial (i.e. not really worth it) if the gross income earned is less than $75,000, probably beneficial if the income is between $75,000 and $100,000 and virtually always beneficial where the income is over $100,000. Best of luck in making your decision on whether a loan-out company is worthwhile to you.