How To Start An LLC for Fitness Businesses
Starting a fitness business can be very rewarding in several ways. Not only do you help people gain the physical health and fitness they need and deserve, but you also make an honest living out of improving people’s lives.
If you’re looking to start a fitness business, you’re in the right place. In particular, we recommend forming a fitness LLC so that you can do the things you enjoy without a lot of government hassle corporations have to go through. But if you’re unsure if an LLC is the right structure for your business, let’s dive deep into what it is, its benefits, and other notable things you should know about it.
What Is An LLC?
First, let’s talk about what an LLC is. Simply put, an LLC, short for Limited Liability Company, is a type of business structure that provides you with legal personal asset protection without the paperwork that comes with being incorporated. Big names like Nike, SRAM LLC, and fFitness First LLC all LLC formed businesses.
An LLC boasts of a few things, but it is most known for being flexible in taxation structures. Additionally, LLCs have the option to elect something called an “S-Corporation” tax status, which can provide potential tax advantages in certain situations. All in all, a fitness LLC is the best option you have as a startup.
What Are The Advantages of A Fitness LLC?
Starting an LLC lets you enjoy some benefits, including the following:
Personal asset protection
Since you’ll be dealing with personal health and fitness, you’ll need to ensure the best services for your customers. But what if something wrong happens, and your company gets sued for it? LLCs are designed to take on these lawsuits and pay for penalties and dues using their own assets, not those belonging to their owners.
Less paperwork to run
Unlike bigger companies registered as corporations, LLCs do not require a lot of paperwork to start and run. All you need is to file the necessary documents to register your LLC with your state, then make a few reports from time to time.
LLCs can be run however you want. For example, if your LLC has multiple owners, you can choose to give everyone the power or establish a different system based on the specific needs and agreements of the LLC.
You can also appoint managers who will be responsible for handling day-to-day operations and making decisions. These people can be either members of the LLC or hired individuals specifically for their expertise. This way, you can appoint the right people for the right role, like an accountant for a gym.
Its own bank account
Your LLC can open its own bank account, allowing you to separate the business’ finances from your personal finances. This helps prevent the mishandling of funds that could happen if your company doesn’t have its own bank account.
Boost in credibility
As an LLC, you no longer have to offer services in your name only. Your fitness LLC can enjoy the credibility that comes with being a government-registered business. This means you can gain the trust of more clients, even those you never thought would avail of your services.
What Are The Disadvantages of A Fitness LLC?
All that said, LLCs have some disadvantages as well. Here’s what you need to know about them.
While an LLC needs less paperwork, filing them on time and without any mistakes in the details could be challenging for some. You can hire someone to handle this task to ensure the accuracy of the information and to avoid missing deadlines.
Confusion regarding taxes
While LLCs offer flexible taxation options, there’s a chance that it might get confusing for some who are not knowledgeable about it (especially if it’s your first time running a business). You can ask accountants to help you deal with this.
Difficulty in membership changes
Changes in the membership of LLCs have to be approved by all of its members. While this won’t be an issue if your LLC only has one or a few members, it might become a concern if yours has a lot. Plan your members ahead of time to avoid this.
How To Create A Fitness LLC
Starting a fitness LLC is fairly straightforward. And while it may be challenging for some, the rewards are worth the effort. Here’s what you need to do:
- Choose what services to offer your clients
- Choose a name
- Get a registered agent
- File an Article of Organization
- Get an EIN for your business
- Make an Operating Agreement
- Get certified or permits if necessary
Choose what services to offer your clients
First, choose the kind of fitness services you want to offer. For example, you can have a gym with personal coaches or a company of coaches providing personalized fitness programs without a gym. You can even sell fitness equipment instead of offering fitness classes. Specializing in one thing helps you target all your resources onto one audience and grow from there. Anyway, you can offer more stuff when you have the capital.
Choose a name
Your chosen name will effectively communicate the kind of services you offer to your clients. It has to be straightforward and should be easy to remember. Your preferred name must also be unique from other companies in your state or your Secretary will reject your application.
Get a registered agent
A registered agent is someone who will receive all legal documents pertaining to your business. They will communicate with your state on your company’s behalf. Make sure to hire one who resides in your state.
File an Article of Organization
The Article of Organization is a document used to register your new LLC in your state. It provides the government with necessary information about your fitness LLC, its members, and its purpose. You can hire someone to file this on your behalf to ensure the accuracy of the information you provide and so that it gets submitted before the deadline.
Get an EIN for your business
Before starting your fitness LLC, it is important to obtain an Employer Identification Number (EIN). This number is needed to hire workers, file taxes with the IRS, open a bank account, and apply for loans when needed. It’s not required, per se, but you definitely need one if you’re hiring employees.
Make an Operating Agreement
An Operating Agreement serves as a user manual for your fitness LLC, outlining the roles, responsibilities, and relationships among its members. It describes the relationship between the LLC’s members and defines everyone’s roles and responsibilities, and instructs everyone on how the business’s profits and losses are divided. If your business is co-owned, referring to the Operating Agreement, everyone involved can understand their respective roles and work together towards the shared goals of the LLC.
Get certified or permits if necessary
Some fitness ventures need certifications before they can be formed. For instance, personal trainers require one. Gyms need permits. Be sure you’re adhering to your local laws to avoid any penalties during your operations.
How Are Fitness LLCs Taxed?
LLCs, by default, are taxed as “disregarded entities.” This means the revenue your company makes is passed on to you and will be considered pass-through income and filed on your personal tax return. Essentially, the LLC’s profits and losses are treated as your own, simplifying the tax process and avoiding the need for separate business tax filings.
Aside from paying taxes for that, you will also need to pay contributions to Medicare and Social Services. Your company might also need to pay an annual Franchise tax if your state requires it.
What Are The Costs Of Starting A Fitness LLC?
As with any new venture, forming your new fitness LLC will cost you a bit of money. Here’s what you need to spend to get it started.
Submitting the necessary paperwork to register your new LLC will cost you anywhere between $50 and $800 depending on what state you are in. You will also spend a bit more if you’re hiring someone to work on filing the paperwork.
Your registered agent needs to be paid for the work they do for your company. The amount you pay depends on the organization they belong to, but it could range anywhere from $100 to $300.
It is important to have insurance for your fitness LLC to protect yourself in case of lawsuits. As a fitness business, there is always a risk of accidents or injuries during your operations, sessions, and more. If someone files a lawsuit claiming negligence or injury, insurance can cover all legal expenses, medical costs, and potential damages. Consult an insurance professional to determine the right coverage options based on your specific risks.
By venturing into the fitness industry, you not only generate revenue but also contribute to improving people’s health and well-being. While the process may involve some challenges, the benefits and rewards of establishing your own fitness LLC make the investment of time, resources, and effort worthwhile.
Is LLC The Best Entity For Me?
Maybe, LLC isn’t the right entity for you. Maybe it is a C-Corp. Only way to find out is to directly compare them all.
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