Starting an LLC for a Fitness Business: Is It Necessary?

Starting a fitness business can be a thrilling venture, but it is also very risky.

Even worse, navigating the legal side of things can be challenging. That’s where forming an LLC comes in.

Your fitness business needs an LLC to protect your personal assets from lawsuits and ensure its success.

Yes, it would help if you protect yourself from legal actions in unforeseen circumstances. Lawsuits are unpleasant, but situations where you lose everything you own are even worse.

This guide is about how to start an LLC, even if you’re a personal trainer, yoga instructor, or gym owner.

Do You Need an LLC for Your Fitness Business?

Starting an LLC for your fitness business can be smart, as it protects your personal assets—like your home, car, or savings—from any business debts or legal issues.

An LLC for your fitness venture provides limited liability, meaning your personal assets remain separate from your business liabilities. Additionally, having an LLC can enhance your credibility with clients and vendors, making your business appear more professional and trustworthy.

It also offers tax flexibility, allowing you to choose how you want to be taxed, potentially saving you money.

Suppose you’re planning to run a fitness business. In that case, whether online or in-person, an LLC can offer valuable legal protection, especially if you’re dealing with contracts or activities that could result in injuries. While forming an LLC does involve some costs and paperwork, it’s a worthwhile consideration as your business grows.

What are the advantages of starting an LLC for a fitness business?

Personal Asset Protection

As a fitness business entrepreneur, you need to protect yourself and your personal assets against liabilities because accidents can happen, equipment can malfunction, and professional errors can occur, leading to lawsuits and financial claims.

Business-related debts and reputation damage can also put personal assets at risk.

Personal assets that need protection include homes, savings, investments, vehicles, and other valuable possessions. Protecting these assets can safeguard your financial security and maintain peace of mind, allowing you to focus on growing your business.

Flexible Management

An LLC provides a flexible management structure. You can choose to manage the business yourself or appoint others to help. This contrasts sharply with a sole proprietorship, which requires you to run everything.

If you decide to grow your business and hire managers or trainers, an LLC structure allows you to easily delegate responsibilities.

Pass-through Taxation

Pass-through taxation simplifies how your business gets taxed.

With an LLC, profits are only taxed once, at your personal tax rate. This differs from a C Corporation, where profits are taxed at corporate and personal levels.

For instance, if your fitness business earns $100,000, you report that income on your personal tax return and pay taxes only once. This method can yield significant tax savings, making an LLC more appealing to new fitness entrepreneurs.

Potential to Expand Business in the Long Run

An LLC can make it easier to expand your business in the future. Adding new partners or members is straightforward.

If you start a gym and later want to share ownership with a partner or investor, it’s easier to do so as an LLC. This flexibility to consider growth helps ensure your business remains competitive and adaptable.

Steps to Starting an LLC for Fitness Business

Follow these steps to establish your personal trainer LLC correctly:

1. Choose a State to register your Fitness Business LLC

Typically, the best state to register your LLC is your home state, where the business is located. However, if your business operates primarily online, selecting a business-friendly state for your LLC registration is important.

2. Choose a unique name for your Fitness Business LLC

Your LLC name must be unique and not already used by another business. This name should reflect your fitness services and be easy to remember.

Essential guidelines to consider:

• The name must include “LLC”, “L.L.C.”, or “Limited Liability Company.”
• Avoid using restricted words like “bank” or “insurance” unless you meet specific requirements.

Some examples of names are FitCore LLC, Active Lifestyle L.LC, FitForward LLC, and Synergy Fitness LLC. There are dozens of creative name ideas for your LLC.

Once you have a name, check with your state’s business registry to ensure it’s available.

3. Get a registered agent in your State

A registered agent is an individual responsible for receiving legal documents on behalf of your LLC. This can be an individual or a service that provides registered agent services.

Your registered agent must have a physical address in the state where your LLC is registered.

Find a reliable agent who understands your business needs. I recommend Northwest Registered Agent because I used them when launching my LLC, and they have been consistent in their service quality for years.

You can also research registered agents in your state or become your own agent if you meet all the requirements. However, Northwest is still very suitable and available in all 50 U.S. states.

4. File Articles of Organization (or Certificate of Formation)

To officially create your LLC, you must file Articles of Organization with your state’s business office. It is a crucial document in forming an LLC for a fitness business as it is the foundation for the company’s legal existence.

Some states refer to it as a Certificate of Formation.

This document typically includes your LLC name, the address of its principal office, and the registered agent’s name and address.

Filing fees vary but generally range from $50 to $500, depending on the state. After filing, you’ll receive a confirmation, which is essential for your business records.

5. Get an Employer Identification Number (EIN) for your business

An Employer Identification Number (EIN) is necessary for various business activities, including opening a bank account and hiring employees. You can obtain your EIN for free from the IRS website or by submitting Form SS-4.

6. Create an operating agreement (optional)

Though not always required, having an operating agreement is beneficial for forming an LLC for a fitness business. It clarifies ownership and roles, outlines management structure, establishes financial procedures, and sets operational guidelines.

This document reduces conflicts by clearly outlining expectations and rules and complies with state requirements.

Click here to download our free Operating Agreement Template

7. Obtain business permits and licenses (if necessary)

Your fitness business may need specific permits and licenses to operate legally. Requirements can vary widely based on your location and the services you offer.

Research local regulations related to:

• General business licenses
• Professional licenses (like personal training certifications)
• Health and safety permits

Contact your city or county government offices for detailed information.

8. Open a business bank account for your Fitness Business LLC

Opening a business bank account is a critical step after forming your LLC. It helps you keep personal and business finances separate, which is vital for protecting your assets.

When selecting a bank, consider banking fees, access to online services, and the number of local branches available.

Additional Resources and Other Considerations for Fitness Business LLC Owners

Get an LLC Formation Service to Ease the Entire Process

Using an LLC formation service can simplify starting your fitness business. Northwest Registered Agent is highly recommended for its excellent customer service and straightforward process.

They will help you file your formation documents and quickly obtain an Employer Identification Number (EIN). This service reduces the chance of errors and saves you time.

Northwest is also a registered agent service, meaning they will handle official paperwork for you. This feature ensures you stay compliant with state regulations.

They offer the first full year of registered agent services for free and provide timely customer support. I have used them for my LLC for years and always recommend them.

Understand Maintenance Requirements (Annual Reports, Franchise Taxes, etc.)

Owning an LLC comes with responsibilities after it’s set up. You must be aware of ongoing maintenance tasks. Most states require you to file annual reports to keep your LLC in good standing.

These reports confirm that your business information is up-to-date. Depending on your state, franchise taxes may also need to be paid yearly.

File a Beneficial Ownership Information Report (BOI)

Filing a Business Owner’s Information (BOI) report, also known as a Statement of Information, is important for forming an LLC for a fitness business because it provides the state with updated information about the business, such as:

• The business address and principal office location
• The names and addresses of the owners (members) and managers
• The business purpose and description

You May Need to Get Insurance for Your LLC

Getting insurance for your LLC is essential for several reasons. First, liability insurance protects your personal assets—like your home and savings—if your business is sued. It also covers legal fees and settlements, reducing financial risk and enhancing your credibility with clients.

In the fitness industry, many clients and studios require fitness professionals to carry liability insurance. This protects against claims from accidents or injuries during workouts and equipment malfunctions.

Get Expert Advice When Needed

Don’t hesitate to seek expert advice when you have questions. Hiring professionals like business attorneys or accountants can clarify legal and financial matters.

An attorney can help you understand your compliance obligations and protect your interests. An accountant can guide you on the best financial practices and tax strategies tailored to your fitness business.

What is the best state to open an LLC for a Fitness business?

Choosing the best state to form your LLC for a fitness business depends on your specific situation. If you live in the United States, your home state is usually the best choice.

Benefits of forming your LLC in your home state:

• Simplicity: You can easily file annual reports and manage your taxes.
• Local Compliance: Being familiar with local regulations is advantageous.
• Registered Agent: Getting a registered agent who understands local laws is easier.

LLC or Sole Proprietorship or Corporations for Fitness Businesses – What is the Best Business Structure?

The best business structure for your fitness business depends on factors like size, ownership, liability concerns, and taxes. Here’s a quick breakdown:

• LLC (Limited Liability Company): Ideal for most fitness businesses, especially if you want liability protection or have multiple owners. It offers tax flexibility and is easy to manage.
• Sole Proprietorship: Great for solo fitness businesses with low risk. It’s easy to set up but lacks personal liability protection.
• Corporation: Best for larger fitness businesses or those looking for investors. It provides strong liability protection but comes with more complexity and regulations.

Can I live in a state different from my LLC?

Yes, you can live in a different state from your fitness LLC. This is known as “foreign qualification” or “registering a foreign LLC.”

You will need to:

1. Form your LLC where you want to operate your business (the “home state”).
2. Register your LLC in the state where you live (the “foreign state”) by filing a “Foreign LLC Registration” or “Certificate of Authority” with the foreign state’s Secretary of State office.
3. Obtain any necessary licenses and permits in both states.
4. Comply with tax requirements in both states.

Nevertheless, note that each state has its rules and regulations regarding foreign LLCs, so you should consult an attorney or tax professional to ensure compliance.

Frequently Asked Questions

What annual fees are associated with a fitness business LLC?

Annual fees can vary by state. You may need to pay an annual report fee, franchise tax, or other business-related fees to maintain your LLC’s good standing. Check your state’s requirements for specific amounts.

Can I form an LLC in a state different from where my online fitness business is located?

Yes, you can form an LLC in a state different from where you operate. This is often done to exploit favorable business laws or tax benefits. However, you may need to register your LLC as a foreign entity in your operating state.

Can I use my bank account for my business LLC?

You should open a separate bank account for your LLC. Mixing personal and business finances can lead to legal issues and make it harder to track your business expenses. A separate account helps maintain liability protection.

What are the tax benefits of forming an LLC for a fitness business?

An LLC may offer pass-through taxation, meaning profits are taxed only at the individual owner’s level, not at the business level. This can lead to potential tax savings compared to other business structures.

Can I serve as my LLC’s registered agent?

Yes, you can act as your LLC’s registered agent as long as you have a physical address in the state of formation. As a registered agent, you’ll receive legal documents on behalf of your LLC.

Why should I hire an LLC service when I can form my own LLC?

Hiring an LLC service can save you time and reduce mistakes. These services handle paperwork, help ensure compliance with state laws, and provide support throughout the formation process, which can be valuable for busy entrepreneurs.

Are permits or licenses required for a fitness business?

Yes, you may need various permits or licenses to operate a fitness business. Requirements vary by location and business type, so check with your local government to ensure compliance with regulations.