Should I Start an LLC for My Waterpark?

Starting a limited liability company (LLC) for your waterpark 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 waterpark, lawsuits can arise from things like injuries suffered by clients on the slides and property damage after flooding.

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

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

Do I Need an LLC for a Waterpark?

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 Waterpark

By starting an LLC for your waterpark, 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.

Waterparks will benefit from liability protection because of liabilities related to the safety of guests who come to your park. Additionally, as with many other types of businesses, there is the risk of trademark and copyright infringement.

Example 1:Two children are injured when a slide in your waterpark suddenly malfunctions. They are rushed to the nearest hospital for emergency treatment. Following this, their parents sue your business. Regardless of the court’s ruling, your personal assets will remain safeguarded from any fees associated with the lawsuit as a result of your limited liability in law.

Example 2: A customer complains that they’ve suffered from chlorine poisoning after swimming in one of the pools at your waterpark. He sustains multiple skin injuries and has to undergo medical treatment. If he goes on to sue, the lawsuit will only affect your LLC’s assets (presuming that you didn’t personally act negligently.).

Example 3: A few customers' properties are damaged following a flooding incident in your waterpark. Their combined value amounts to almost $50,000, and they press charges, citing negligence. With an LLC structure in place, your personal assets will remain safe from the claimants.

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 Waterpark

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 waterpark 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

Waterparks 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 professional 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?

All businesses need insurance to protect their business assets — even LLCs. This is because limited liability protection from being an LLC protects your personal assets, not your business assets.

Waterparks need insurance to protect themselves from foreseeable financial risks. These include risks that arise as a result of guest-related injuries, faulty or inadequate repairs, and debt accrual.

Common Situations Business Insurance May Cover for a Waterpark

Example 1: While climbing the stairs for a waterslide, a guest slips and falls down several steps. General liability insurance would likely cover any injuries they sustained during the incident.

Example 2: A ride malfunction results in severe injuries for several guests who were on the ride. Even if responsibility is ultimately attributed to the ride manufacturer, your waterpark may be named in a liability lawsuit. General liability insurance would likely cover the legal costs.

Example 3: An advertising campaign claims that your waterpark has more rides than is operational for the summer. Several guests who came partly because of the number of rides file a joint false advertising lawsuit. The suit would probably be covered by general liability insurance.

Other Types of Coverage Waterparks 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 waterparks should obtain:

Commercial Property Insurance

Waterparks need commercial property insurance for their buildings, rides, games, and other attractions. Property insurance can protect multiple types of physical assets, including buildings, equipment, inventory, and supplies.

Most waterparks need robust commercial property insurance because they have many expensive features to protect. Make sure your policy’s limits at least meet the rebuilding cost of all your park’s buildings, rides, and attractions.

Commercial property insurance is generally included in a business owner’s policy (BOP).

Workers’ Compensation Insurance

Businesses that have employees typically need to protect them with workers’ compensation insurance. The coverage protects against both work-related injuries and illnesses, and it’s usually required by state law if your business has employees.

Commercial Umbrella Insurance

There is an upper limit to the amount of liability protection that primary insurance policies offer. Commercial umbrella insurance provides additional liability coverage, often in the millions of dollars.

Commercial umbrella insurance is especially important for waterparks because a single incident could result in one or more extremely expensive lawsuits. If someone drowns or multiple people are injured at once, the resulting liability costs could easily exceed a primary policy’s limits.

Commercial umbrella insurance is included in certain package policies and is also available on its own.

Business Interruption Insurance

Recovering from a disaster can take a lot of time when you need to rebuild attractions, and bills don’t necessarily stop coming due during that time. Business interruption insurance can provide supplemental revenue while your business recovers from a disaster.

Without ticket sales providing revenue following a disaster, the supplemental payments from business interruption insurance could potentially save your waterpark from bankruptcy. For many businesses that need to rebuild, this insurance is the difference between closing permanently and eventually reopening.

Crime Insurance

Commercial property insurance generally protects against third-party theft, but it often excludes stealing by employees. If you'd like protection against employee theft, consider getting crime insurance. The insurance offers coverage for a wide array of illegal and dishonest employee actions.

Many waterparks decide to get crime insurance because multiple temporary and part-time employees handle money, which gives them opportunities to steal. Even a single employee can steal a significant amount if they have the right opportunity.

Crime insurance is included in certain package policies and is also available on its own.

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, workers’ compensation insurance, and commercial property insurance.

Read our Business Insurance for Waterparks article for more info.

The first thing to consider when starting a waterpark is the choice of land, as you will need to be placed in a densely-populated area. When it comes to setting the waterpark up (i.e., purchasing buildings, HVAC, pools, waterslides, snack bars, etc.), you will need a budget of around $700,000 to $1.5 million.

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

Since waterparks are quite large and require maintenance over time, there are several ongoing costs to consider when running a waterpark, including operational supplies, construction, payroll, as well as utilities, and chemicals, just to name a few.

Learn more about running a waterpark.

Money for a waterpark is generated by charging admission to each guest that enters the park. Once guests are in the park, several service offerings could generate money as well, including concessions and equipment rentals.

Learn more about starting a waterpark.

Waterparks are a type of amusement park that features water-related activities, rides, and pools. Some waterparks exist in conjunction with traditional amusement parks.

With roughly 375 million guests visiting waterparks every year, these parks have the potential to earn significant portions of profit in this multibillion-dollar industry.

Learn more about starting a waterpark.