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How To Start An LLC for Personal Trainers
As a personal trainer, your skills and expertise are key to getting more clients. And as your reputation grows, the number of people availing your services will only increase. Starting a business will help you gain more clients and even expand your services.
That said, there are certain risks to starting a personal service business such as yours. In order to mitigate those risks, we suggest forming an LLC. An LLC is able to provide you with the necessary protections while allowing you to enjoy the perks of having your own company.
But before we talk about how you can form your own LLC, let’s first discuss what it is and why you should choose it instead of other business types.
Definition
What Is An LLC?
LLC, which stands for limited liability company, is a hybrid type of business structure combining all the good things about sole proprietorships, partnerships, and corporations. It is easier to form compared to corporations, for example and allows for lower taxes like sole proprietorships and partnerships. The structure also protects your personal assets from being used to pay penalties in the event that your company gets sued.
LLC is the most popular business structure as of now. Bicycle and fitness hardware manufacturing company SRAM LLC, for instance, is one such business enjoying the benefits of being an LLC.
Advantages
What Are The Advantages of A Personal Trainer LLC?
As an LLC, your personal trainer company will enjoy specific advantages that other businesses won’t have. These benefits will help you in many ways pertaining to the growth of your company and revenue. Below are some of them.
Personal asset protection
LLCs are entities that are separate from their owners (called members). You offer your services to your clients under your company. In the event that a client decides to sue your company for some reason, your company will have to pay penalties using its acquired assets. You, as the member, can never be pursued to pay using your own money. Sole proprietorships and partnerships do not have this kind of legal protection.
Government endorsement
LLCs need to be approved by your local Secretary of State before they can do any form of business. As such, being a state-registered LLC means having the endorsement of your local government. This immediately adds credibility to your personal training business, helping you gain the trust of potential clients.
Bigger opportunities
Skill and reputation aren’t the only things that will draw customers to your business. Some government organizations will only secure contracts with businesses that have established entities. As an LLC, you qualify for that. This means you might be able to have bigger opportunities than ever before.
Better handling of finances
Your LLC’s finances are separate from yours. Your LLC can open its own bank account, allowing you to segregate the company’s revenues and your income from it, apply for loans on its own behalf, and more. This helps you prevent the mishandling of funds that could happen if your personal bank accounts are also used for your business.
Disadvantages
What Are The Disadvantages of A Personal Trainer LLC?
All that said, there are also some disadvantages to having an LLC. These aren’t serious enough to be considered reasons not to open an LLC, but here’s a quick look at them and how you can avoid them.
More paperwork
Since personal trainer businesses are often single-owned, expect to have more paperwork compared to a sole proprietorship–the other more common way to establish a business like yours. Again, an LLC has more protections, which means the effort is actually worth it.
Filing difficulties
Filing paperwork to register your LLC can be quite difficult because of the details you need to provide and the deadlines you need to meet. For this reason, you should consider hiring services who can take care of filing the documents necessary to form your personal trainer LLC.
Confusing with regard to taxation
LLCs are very flexible in the way they are taxed. This flexibility, however, might be confusing if you don’t know how it works. We’ll discuss more of this in our tax section below.
LLC Formation
How To Create A Personal Trainer LLC
Creating your personal trainer LLC can be done in a few steps. Here’s what you need to do:
- Get proper training and/or certification
- Choose a name for your LLC
- Hire a registered agent
- Submit an Article of Organization
- Create an Operating Agreement
Get proper training and/or certification
If not, the minimum requirement is to undergo a personal trainer accreditation program to be certified for the job. But ideally, you’ll want extra certifications (or related degrees) under your belt to provide your clients the best possible professional image possible
Choose your target demographic
While everyone needs to exercise to stay fit and healthy, not everyone will need personal coaching and accountability to get fit. Select your target demographic so you can better prepare your fitness plans. For example, you can provide training for women in their 30s, the injured, or the elderly. You can always expand your services down the line, but it’s best to focus on one when you’re just starting up.
Moreover, carefully choose the services you will offer potential clients in the future. Doing this helps to narrow down the tasks you will do and allows you to specialize.
Choose a name for your LLC
Next, choose a name that fits your plans. You can build your name around your target demographic and the services you plan to offer them. Just make sure that the name sounds more appealing than not.
Also, keep in mind that the name you choose should be unique and not be used by another company in your state. This will help you avoid any potential lawsuits down the road.
Hire a registered agent
A registered agent is someone who will handle all correspondence between your personal trainer LLC and your government. They receive all legal documents pertaining to your business and act as a representative of your company. This can be you, as long as you know your local laws—but it’s highly encouraged to hire a third party who knows what they’re doing. Plus, this gives you the opportunity to focus on running your business.
Submit an Article of Organization
An Article of Organization is a document that contains all important details about your company, including its members and its purpose for being. It is used to register your LLC with your state and has to be approved before your company can do any business. The paperwork is filed to your Secretary of State’s office.
Create an Operating Agreement
An operating agreement serves to provide your LLC with an outline that covers the relationship between members, each one’s roles and responsibilities, and instructions regarding the distribution of profits and losses. Think of it like a contract for you and people involved in your business. You should create this even if you plan to have a single-member LLC so that you are reminded of these details.
LLC Taxes
How Are Personal Trainer LLCs Taxed?
As mentioned above, LLC members are given the choice of how their business should be taxed. Here’s a quick overview of what you need to know about it:
By default
LLCs, by default, are taxed the same way sole proprietorships and partnerships are taxed: as a pass-through entity. The income you receive from your LLC’s revenues is considered pass-through income and will be taxed at the individual level. This means anything you receive as profit will be included with your individual tax return, which you only need to file once a year.
You will then have to pay your contributions to Medicare and Social Services individually as well. This is because this tax will not be automatically deducted from the income you receive from your LLC.
If your LLC is taxed as an S corporation
If your personal trainer LLC elects to be taxed as a corporation, your company will treat you as an “employee” legally, and you can pay yourself a reasonable salary. This is the preferred tax method for business owners who are profiting too much to justify the taxes they need to pay individually.
The company, however, will need to spend more on documentation, bookkeeping, accounting, and other necessary services such as payroll.
Franchise taxes
Lastly, depending on the state where your LLC is based, you may or may not be required to pay franchise tax—a fee that serves as an annual renewal of your business in the state. The amount varies with state, but you should prepare to pay about $100 to $800.
Costs
What Are The Costs Of Starting A Personal Trainer LLC?
Now, let’s discuss the amount of money you need to prepare in order to start your personal trainer business. You might be surprised that it’s not as much as you think.
Filing Fees
Before your personal trainer LLC can be registered with your state, you will need to file the necessary paperwork and pay the corresponding fee. The amount you need to pay varies with state, but it is between $50 to $800. Make sure to check with your local Secretary of State to know the actual costs.
Also, you will need to spend more on this, but hiring someone to take care of filing the documents will make it easier for you. They will ensure the accuracy of details in the documents and will submit them on time. The cost will be worth it.
Registered Agent Fees
Your registered agent will need to be compensated for the work they do for your company. The amount depends on the agent or the organization they are affiliated with but be prepared to pay $100 to $300 for their services.
Operating Agreement
You can create your own operating agreement, which means you technically won’t need to spend anything on it. But to make sure that the operating agreement you create has no loopholes or that it would have no errors, getting some help from a lawyer or another expert might be necessary. Prepare to spend up to $200 for this document.
Publication
You will also need to publish notices about your new personal trainer LLC in your local newspapers for a time. The duration varies with state, so ask your local Secretary of State for details. Also, the cost of publication depends on the newspapers, so ask their respective companies for details regarding prices.
Insurance
While it is always better to be careful with the exercise and fitness plans you subject your clients to, it will also be wise to carry insurance with you to protect you from potential injury lawsuits that could arise while you are in practice.
Operating expenses
Lastly, you will also need to spend some money on the things you will need for your new venture. This includes rental costs if you are renting. It also includes the specific equipment you use for your clients’ personal fitness needs.
Starting your own personal trainer LLC allows you to maximize your skills, certification, and passion for health while earning profit from it. The process is not easy and requires some effort, but once your LLC starts, you will enjoy the benefits of having your own company that protects your assets while letting you do business. Form your personal trainer LLC now with StartGlobal now!
Comparisons
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.
LLC vs Corporation (C-Corp)
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LLC vs S-Corp
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