Should I Start an LLC for My Dance Studio?

Starting a limited liability company (LLC) for your dance studio can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For a dance studio, lawsuits can arise from things like an instructor getting injured during a class or a customer pulling a muscle and requiring physiotherapy as a result of attempting a new dance move.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your dance studio seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

Do I Need an LLC for a Dance Studio?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for a Dance Studio

By starting an LLC for your dance studio, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Dance studios will benefit from liability protection because studios with students coming to visit for instruction present some financial liability associated with the safety of students and potential for injury while on the studio premises.

Example 1: A student enrolls in your dance studio but slips and falls due to their own negligence while taking a class. The student then blames this on the dance studio and seeks compensation for the damages. With an LLC structure, your personal assets will remain safe if you are not directly responsible for the incident.

Example 2: A customer sues your business for breach of contract after you failed to deliver the promised service. Even though the lawsuit holds your business legally liable, the LLC structure prevents any personal assets from being used to pay for it.

Example 3: One of the dance classes at your studio is not taught in accordance with safety standards, resulting in several students becoming injured. As a result, they decide to sue your business. Here, limited liability protection would ensure that you are not personally liable for any liabilities should the case be settled in court.

Example 4: While one of your students is stretching their legs on a ballet barre, the barre is ripped out of the wall. The fall the student takes leads to expensive medical injuries and expenses that you are now liable for.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for a Dance Studio

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if a dance studio owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

Credibility and Consumer Trust

Dance studios rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a trusted LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Do LLCs Need Insurance?

Yes, LLCs need insurance to protect their assets. Even though an LLC protects the owners' personal assets, dance studios still need to be insured to protect their financial assets and accounts against accidents that can happen during sessions.

Common Situations Business Insurance May Cover for a Dance Studio

Example 1: During your spring production, one of the dancers misses their cue on stage and must enter from the back of the curtain to step in time. Unfortunately, this area isn’t cleared for dancers, and the performer trips over a cord, breaking their arm in the fall. General liability coverage will likely help to cover any damages in a lawsuit.

Example 2: While stretching on a ballet barre, one of your students lifts their leg up only to come crashing down as the barre is ripped out of the wall. The student sustains a serious leg injury that requires surgery to repair. General liability insurance will likely pay for their medical expenses and any other damages.

Example 3: As your team sets up the stage for a performance, a group of parents is touring the studio. One of the parents goes out onto the stage just as a light falls from the scaffolding. The parent is hit in the shoulder and needs surgery for their injuries. General liability insurance will likely pay for their surgery and any other damages awarded in a lawsuit.

Other Types of Coverage Dance Studios Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all dance studios should obtain:

Commercial Property Insurance

If you own the building that your dance studio operates from, you should carry a commercial property insurance policy. This type of insurance coverage will help not only protect the physical building in the event of an accident or natural disaster but the business-related equipment inside as well.

Workers’ Compensation Insurance

Most states require that businesses with part-time and full-time employees carry workers’ compensation insurance. This coverage will pay for an employee’s medical bills if they are ever injured or become ill while performing their job duties.

Commercial Auto Insurance

Any vehicles that are used for work-related duties must be covered under a commercial auto insurance policy. Personal car insurance will not pay for any injuries or third-party damages associated with an accident involving a company vehicle.

Commercial Umbrella Insurance

Operating a dance studio comes with many different risks, and if your primary insurance policies are exhausted following a lawsuit, commercial umbrella liability coverage works to go above and beyond those primary limits. This can help to prevent your business from closing down due to particularly high legal costs.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance and commercial property insurance.

Read our Business Insurance for Dance Studios article for more info.

Opening a dance studio requires significant financial investments towards purchasing or leasing a suitable building and investing in liability insurance. A studio owner can reduce the cost of opening by leasing and renovating an existing commercial space or renting a less expensive space in a cheaper part of town.

Visit our How to Start a Dance Studio guide to learn more about the costs of starting and maintaining this business.

Dance studio ongoing costs include mortgage and taxes associated with the studio itself, employee salaries, and insurance premiums.

Learn more about running a dance studio.

Dance studios make money either by charging independent instructors to rent out class time at the studio, or they employ instructors and collect the money that is charged for lessons.

Learn more about starting a dance studio.

Whether a traditional dance studio or a dance fitness studio (e.g., Zumba), dance studios offer lessons for individuals of all ages.

Dance classes can significantly increase their profits when offering special classes with guest teachers or hosting recitals, where you can charge more per class.

Learn more about starting a dance studio.