Should I Start an LLC for My Comedy Club?

Starting a limited liability company (LLC) for your comedy club 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 comedy club, lawsuits can arise from things like customer-related injuries, as well as from slander and defamation allegations.

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

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

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Do I Need an LLC for a Comedy Club?

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 Comedy Club

By starting an LLC for your comedy club, 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.

Comedy clubs will benefit from liability protection because entertainment businesses, including comedy clubs, face a variety of risks associated with guests visiting their locations. Additionally, any business that serves alcohol faces additional risks.

Example 1: During a performance, one of the comedians at your comedy club picks out an audience member and makes fun of them to the crowd. The audience member feels greatly offended and feels that his reputation has been severely negatively affected by the performance. As a result, he sues your business for defamation. In this case, any liability of your business to pay damages cannot be imposed on your personal assets.

Example 2: After an audience member is invited on stage by a comedian at your comedy club, the audience member falls through a broken floorboard on the stage and breaks their leg. This prompts them to sue your business for the bodily harm they suffered. Limited liability protects you from being held personally responsible for any liability to pay damages levied against your business.

Example 3: After the end of a performance, a comedian at your comedy club crashes his car into a customer in the parking lot of your venue. As a result, the customer brings a lawsuit against your business for this property damage they allege is the fault of your comedy club. If the court holds that your business owes the plaintiff compensation, liability to pay this cannot be imposed on your personal assets.

Example 4: When a comedian brings a crowd member to the stage, the crowd member trips on a loose stair step, falls, and sustains wrist injuries. The injured guest asks your club to cover their medical and legal costs.

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 Comedy Club

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 comedy club 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

Comedy clubs 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?

All businesses, LLCs included, need insurance. This is particularly necessary for comedy clubs in order to protect the high-value assets they tend to own.

In the same way that insurance protects the assets belonging to the business, limited liability protects the personal assets of the LLC’s owner.

Common Situations Business Insurance May Cover for a Comedy Club

Example 1: While an employee grabs a mop to clean up a customer’s spilled drink, another customer slips on the wet floor. General liability insurance would cover the injured customer’s medical bills.

Example 2: When a comedian seeks volunteers for a skit, an excited customer stands on a table to get the comedian’s attention and falls down as the table breaks. General liability insurance would cover the injured customer’s medical bills as well as your legal fees in the event of a lawsuit.

Example 3: An employee removes a soaked floor mat in your entryway and heads to a back room to find a dry replacement. While the entry floor is bare, a customer slips on the slick tile and falls. General liability insurance would cover the customer’s medical bills.

Other Types of Coverage Comedy Clubs 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 comedy clubs should obtain.

Commercial Property Insurance

If you own the building in which you operate, you’re responsible for all business-related property housed there in the event of a fire, burglary, or natural disaster. Commercial property insurance would cover the cost of repairing or replacing your furniture and business equipment after an accident so you can recover quickly.

Liquor Liability Insurance

If your club serves alcohol, this coverage protects you in the event an intoxicated customer hurts someone or damages property after leaving your club, and the injured party sues your business.

Workers’ Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. This coverage protects your 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 benefits stemming from a work-related accident.

Assault and Battery Insurance

Assault and battery coverage protects you in the event of lawsuits related to fights between your customers. It would cover your legal fees and any damages awarded in a settlement.

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, commercial property insurance, and workers’ compensation insurance if you have employees.

Read our Business Insurance for Comedy Clubs article for more info.

Depending on the location and size of the space you decide to rent for your club, the exact startup cost of your comedy club will vary, though you should expect it to be around the $100,000 mark. This should cover the costs for the kitchen and bar equipment, any structural changes you want to do to the property, the property itself, and all relevant licensing.

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

Some of the ongoing expenses include appearance fees for the acts themselves, food and beverages, rent, local licensing, as well as additional office and administrative expenses.

Learn more about running a comedy club.

Comedy clubs charge guests for admission to comedy shows. They also typically charge an additional amount for the food and drinks guests purchase once inside their venue.

Learn more about starting a comedy club.

Comedy clubs offer a venue for people seeking comedic entertainment. Usually featuring a variety of stand-up and improv comedy acts, comedy clubs may focus on any number of entertaining performances. They can also offer a range of other services, including food and beverages, which can make them seem like several businesses rolled up into one.

An average comedy club has the potential to generate $12,000 in profits per month.

Learn more about starting a comedy club.