Should I Start an LLC for My CrossFit Gym?

Starting a limited liability company (LLC) for your CrossFit gym 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 CrossFit gym, lawsuits can arise from things like medical injuries (e.g., a customer getting injured while performing an exercise shown by your CrossFit instructor, etc.) as well as property damage claims.

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

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

Do I Need an LLC for a CrossFit Gym?

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 CrossFit Gym

By starting an LLC for your CrossFit gym, 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.

CrossFit gyms will benefit from liability protection because of the risk of being sued for personal injuries, property damage, or libel.

Example 1: A dumbbell gets loose and mistakenly drops on one of your client's legs, damaging his ankle. He now blames you for not maintaining your equipment properly and has sued for damages. Forming as an LLC will protect your private properties and finances regardless of the lawsuit's validity.

Example 2: A client suffers a heart attack while lifting a heavy weight. His provoked family members have filed multiple lawsuits against you for not screening properly before admitting him to your CrossFit gym. If the court imposes a heavy fine on you for damages, liability protection will ensure it does not affect your private finances.

Example 3: A client fell and sustained a severe head injury while working out on a treadmill. Her husband now blames you for not educating her on safe handling practices of the treadmill and has sued you for damages. If you are found guilty, your personal assets will be protected as long as the CrossFit gym is registered as an LLC.

Example 4: A customer sues your gym, claiming that you failed to disclose the intensity of the workouts and that you caused them physical duress.

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 CrossFit Gym

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 CrossFit gym 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

CrossFit gyms 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 need insurance to safeguard their business assets against unforeseen damages or losses. CrossFit gyms, precisely, also need an insurance policy in place to ensure they don't lose their business in the event of natural disasters, fire outbreaks, or lawsuits.

Common Situations Business Insurance May Cover for a CrossFit Gym

Example 1: A gym member trips over a medicine ball, breaks his knee, and decides to sue. While a court may rule in your favor because your members assume certain risks by participating in training, general liability insurance would cover your legal fees and any damages awarded in a settlement.

Example 2: As an employee leads a group run outside the gym, they fail to see a bicyclist and knock her over. The injured cyclist wants you to pay for her medical treatment since your employee caused the accident. Your general liability insurance would cover the bicyclist’s medical bills.

Example 3: A competing gym files a lawsuit, claiming your business logo is too similar to their own. General liability insurance would pay for your legal costs and any damages awarded in a settlement.

Other Types of Coverage CrossFit Gyms 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 CrossFit gyms should obtain:

Professional Liability Insurance

If a member decides your advice or services ultimately injured them and files a lawsuit, professional liability insurance would cover your legal fees as well as any damages awarded in a settlement.

Commercial Property Insurance

You’ve made major investments in the exercise equipment and health products that fuel your business. 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 or other natural disaster. Commercial property insurance would cover the cost of repairing or replacing your exercise equipment and other business materials after an accident so you can recover quickly.

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.

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.

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 article for more info.

The cost to open a CrossFit gym is reasonable if you overlook the cost of training your staff. On average, it will cost you between $50,000 and $70,000 to get started, including rent for a suitable space and purchasing necessary equipment.

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

A CrossFit gym needs to purchase and maintain equipment, maintain its certification, and pay for insurance, among other things.

Learn more about running a CrossFit gym.

A CrossFit gym primarily makes money by charging membership fees and sometimes selling things like fitness equipment, drinks, and supplements

Learn more about starting a CrossFit gym.

A CrossFit gym is a type of gym that specializes in CrossFit training and equipment. CrossFit is a type of multidisciplinary exercise that combines weight training, cardiovascular work, high-intensity interval training, and other disciplines.

The average CrossFit gym makes an annual profit in the mid-five figures, while a very successful CrossFit gym with multiple locations can make six figures.

Learn more about starting a CrossFit gym.