Do I Need an LLC for My Fishing Charter Business?
Starting a limited liability company (LLC) for your fishing charter business 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 fishing charter business, lawsuits can arise from things like an employee or customer getting injured during a fishing trip or from property insurance disputes related to damaged fishing boats.
LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your fishing charter business seem more credible.
Recommended: Use Northwest to form an LLC for $29 (plus state fees).
Should I Start an LLC for a Fishing Charter Business?
LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.
You should start 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 Fishing Charter Business
By starting an LLC for your fishing charter business, 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.
Fishing charter businesses will benefit from liability protection because of the relatively high risk of injury aboard a fishing boat.
Example 1: You hire employees to help with your fishing charter operations. One of the employees slips on a wet deck and injures their back while working. If they decide to sue your company for damages, limited liability protection will help shield your personal assets from any liabilities incurred by the lawsuit.
Example 2: As a fishing charter business, you are responsible for ensuring that your boats and equipment are properly maintained. One day, a client’s property is damaged when one of your boats malfunctions and crashes into it. Limited liability protection would help protect your personal assets from any legal or financial consequences associated with the accident.
Example 3: As a fishing charter business, you often handle sensitive customer information such as credit card data, contact details, and financial statements. If this information were to be compromised or leaked due to a security breach or hack, limited liability protection would help shield your personal assets from any lawsuits related to the incident.
Example 4: A customer slips while on your fishing boat and hits their head. They sue your business to cover their medical bills.
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 Fishing Charter Business
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 fishing charter business 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
Fishing charter businesses 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).
How to Form an LLC
Forming an LLC is easy. There are two options for forming your LLC:
- You can hire a dependable 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
- Alabama LLC
- Alaska LLC
- Arizona LLC
- Arkansas LLC
- California LLC
- Colorado LLC
- Connecticut LLC
- Delaware LLC
- Florida LLC
- Georgia LLC
- Hawaii LLC
- Idaho LLC
- Illinois LLC
- Indiana LLC
- Iowa LLC
- Kansas LLC
- Kentucky LLC
- Louisiana LLC
- Maine LLC
- Maryland LLC
- Massachusetts LLC
- Michigan LLC
- Minnesota LLC
- Mississippi LLC
- Missouri LLC
- Montana LLC
- Nebraska LLC
- Nevada LLC
- New Hampshire LLC
- New Jersey LLC
- New Mexico LLC
- New York LLC
- North Carolina LLC
- North Dakota LLC
- Ohio LLC
- Oklahoma LLC
- Oregon LLC
- Pennsylvania LLC
- Rhode Island LLC
- South Carolina LLC
- South Dakota LLC
- Tennessee LLC
- Texas LLC
- Utah LLC
- Vermont LLC
- Virginia LLC
- Washington LLC
- Washington D.C. LLC
- West Virginia LLC
- Wisconsin LLC
- Wyoming LLC
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?
All businesses need insurance to protect their business assets — even LLCs. This is because the limited liability protection from an LLC protects your personal assets, not your business assets.
Fishing charter businesses need insurance to protect against risks such as unforeseen damages, liability claims, and even catastrophic losses. Insurance coverage can help offset the costs associated with these events and ensure that both the business and its customers are financially protected.
Common Situations Business Insurance May Cover for a Fishing Charter Business
Example 1: A potential customer is visiting your place of business to discuss a fishing trip. He fails to see a bunch of cables strung across the ground and trips over them, falling and breaking his arm. Your general liability insurance policy will likely cover the cost of treating his injuries.
Example 2: When stopping by your business to drop off a payment for an upcoming fishing trip, a customer slips and falls on a wet floor and sustains serious injuries. She blames your business and files a lawsuit against your company, demanding compensation. The general liability insurance policy you carry will pay for the cost of your legal defense, including paying for a settlement if it is deemed in the best interests of your business to pay the customer out of court.
Example 3: One of your employees is attempting to teach a visitor how to use a large fishing rod and reel. In his enthusiasm, the employee knocks the customer to the ground, and he sustains injuries. The customer is upset at the employee and takes legal action against your business. Your general liability insurance will pay for your legal costs.
Other Types of Coverage Fishing Charter Businesses 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 fishing charter businesses should obtain:
Professional Liability Insurance
As a charter fishing professional, you face risks unique to your industry. A professional liability insurance policy designed specifically for your business will ensure that you have adequate protection if you are held liable for mistakes or a failure to perform. If a customer claims that you failed in your duties and takes legal action against you, your professional liability insurance policy will cover your legal costs and any settlements you may need to pay.
Commercial Property Insurance
The various supplies and equipment you use to run your fishing charter business probably required a significant investment on your part. Should your commercial property be damaged or lost, such as in the event of a fire or a major storm, then you may struggle to replace all of it out of your own funds. A commercial property insurance policy would give you the financial resources necessary to replace your property so that you could get back to running your business.
Workers’ Compensation Insurance
If you have employees that help you operate your fishing charter business, workers’ comp insurance is a necessity. Not only does it help you meet the legal requirements of your state concerning employers, but it also makes sure you have the ability to help your employees get medical treatment for injuries they sustain on the job. An injured employee can get medical care and help with lost wages related to a work injury as long as you have a workers’ comp policy.
Commercial Umbrella Insurance
There are certain situations where the limits of your general liability insurance policy can be exceeded, such as if your business loses a big lawsuit and you are required to pay extensive damages. If all you have is your general liability insurance, then the extra costs beyond your policy limits will have to be paid by you. But with a commercial umbrella insurance policy, you have added protection. The umbrella policy will take over where the general liability insurance leaves off.
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, commercial property insurance, and workers’ compensation insurance.
Read our Fishing Charter Insurance article for more info.
Opening a fishing charter business requires significant startup expenses, mainly for purchasing a boat, which can range from $41,000 to much more. You can also buy a used boat to reduce costs. Other startup costs include dockage and insurance fees, licenses, utilities, and advertising and management fees.
Visit our How to Start a Fishing Charter Business guide to learn more about the costs of starting and maintaining this business.
The ongoing fees for a fishing charter business are significant, but they aren’t as high as the upfront expenses. FinAngler lists the following costs as ongoing expenses:
- Captain’s fees (or salary)
- Fuel and oil
- Bait and ice
- Tackle
- Dockage
- Insurance
- Business and fishing licenses
- Utilities, accounting, advertising, management, and legal costs
- Boat maintenance
- Boat depreciation
Learn more about running a fishing charter business.
A fishing charter business makes money by charging customers who want to go on fishing trips. Trips may last anywhere from a few hours to several days. Most charters, however, are either half-day or full-day trips.
Learn more about starting a fishing charter business.
A fishing charter business takes customers on fishing trips that otherwise might be inaccessible to them. These trips can be far offshore, and customers often can keep the fish they catch.
A well-run fishing charter business should earn about a 25% profit margin.
Learn more about starting a fishing charter business.
