Should I Start an LLC for My Acting Class Business?

Starting a limited liability company (LLC) for your acting class 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 an acting class business, lawsuits can arise from things like class-related injuries and plagiarism disputes.

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

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

Do I Need an LLC for an Acting Class Business?

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 an Acting Class Business

By starting an LLC for your acting class 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.

Acting class businesses will benefit from liability protection because of the risk of general liability if you have students attending a class in person as well as trademark infringement and libel.

Example 1: A long-time client is unhappy with his progress and decides to sue you and your acting class business for misleading advertising. Regardless of the validity of the lawsuit, your personal assets will remain 100% protected if you are registered as an LLC.

Example 2: As a result of poor cleaning practices and inadequate management from another employee, one of your class instructors falls and breaks their hand during one of the classes. As a result of your LLC’s limited liability, your personal assets (e.g., mortgage, vehicle, etc.) will be out of bounds regardless of how much liability is accrued against your business in a court of law.

Example 3: A rival acting class business believes that one of your employees has plagiarized one of their learning manuals and files a lawsuit against your company. Even though plagiarism itself is not covered by the limited liability offered by an LLC, you will still be protected against acts of plagiarism committed by your employees.

Example 4: An acting coach sues you, claiming that you made false and slanderous statements about them in a recent interview.

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 an Acting Class 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 an acting class 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

Acting class 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).

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?

Yes, every LLC needs business insurance in order to protect its assets, even businesses that just provide acting classes.

This is because the inherent limited liability that is offered by an LLC only applies to its owners’ assets and not the assets of the actual business.

Common Situations Business Insurance May Cover for an Acting Class Business

Example 1: While walking to the restroom in your acting studio, a student slips on wet floor tiles, breaks an arm, and decides to sue your business. General liability insurance would pay for your legal fees and any required settlement.

Example 2: When you fail to see a visitor to your class as you round a corner, you run into him and knock him to the ground. He breaks his tailbone and asks you to pay his medical bills. General liability insurance would cover the cost of the injured visitor’s medical treatment.

Other Types of Coverage Acting Class 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 acting class businesses should obtain:

Professional Liability Insurance

While you strive to provide professional instruction that benefits your students, there’s always a chance one might decide your advice harmed them. If a student files a lawsuit based on your acting instruction, professional liability insurance would cover your legal fees and any required settlement.

Workers’ Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. This coverage protects your acting teachers and other employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover, but also any disability or death benefits stemming from a work-related accident.

Commercial Property Insurance

You made a major investment to purchase real estate, equipment, and supplies for your acting school. In the event of a fire, theft, or natural disaster, commercial property insurance would cover the cost of repairing or replacing your business-related property. This includes structural damage to your building as well as the business equipment and supplies you store there.

Commercial Umbrella Insurance

While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.

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.

Read our Business Insurance for Acting Class Businesses article for more info.

Starting an acting class business can range significantly from zero to over $10,000 per year. This is because you may be able to start your business from home if zoning laws allow, or you may be required to get a place with a large space and expensive lighting and other stage equipment.

You will also be required to purchase promotional materials (e.g., ads, a business website, etc.).

Visit our How to Start an Acting Class Business guide to learn more about the costs of starting and maintaining this business.

The largest ongoing expenses will be the space you are using to hold your classes and salaries if you decide to hire employees.

Learn more about running an acting class business.

Revenue will come from the fees you charge your students to attend classes. How you structure your classes and what sort of offerings you add to increase class attendance will help your business make money.

Learn more about starting an acting class business.

Acting class businesses provide acting lessons to students, either through one-on-one lessons or through group classes.

The average profit margin for an acting class business is going to depend on the building expense, salaries you pay, and how much you are able to charge for your classes.

Learn more about starting an acting class business.