Should I Start an LLC for My Cruise Line?

Starting a limited liability company (LLC) for your cruise line 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 cruise line, lawsuits can arise from things like collisions, negligence (e.g., from the cruise ship’s captain, etc.), customer injuries, and insurance disputes.

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

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

Cruise ships stationed on the coast of an ocean

Do I Need an LLC for a Cruise Line?

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 Cruise Line

By starting an LLC for your cruise line, 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.

Cruise lines will benefit from liability protection because of the risk of being sued for personal injuries, trademark infringement, and property damage.

Example 1: A passenger suddenly slips and falls due to wet and slippery floors on the ship, resulting in brain damage. His family has filed a lawsuit against you, demanding you pay heavily for damages. If the court finds you guilty and imposes a heavy fine on you, liability protection will limit the effects of the damages to only your business assets.

Example 2: Many passengers were seriously injured due to your cruise ship and underwater debris collision. They blame your ship crew for being careless and file multiple lawsuits against you. As an LLC, the effect of the lawsuit will not affect your personal finances.

Example 3: An illness outbreak on your cruise ship infected many passengers on board. Their families are now suing you for poor food safety standards, sanitation, and lack of medical practitioners. In situations like this, an LLC will prevent your private assets from being jeopardized if the court finds you guilty.

Example 4: Several of your customers sue your business, claiming they got severe food poisoning during their trip.

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 Cruise Line

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 cruise line 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

Cruise lines 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?

Yes. In order to avoid permanent loss of business assets in the event of natural disasters, accidents, or theft, all businesses should be properly insured. Cruise lines need insurance to protect their expensive cruise ships and other assets from unexpected incidents like fire outbreaks, collisions, or other factors that can harm the business.

Common Situations Business Insurance May Cover for a Cruise Line

Example 1: A passenger injures himself when your cruise ship collides with another ship during docking. General liability insurance would cover the cost of the passenger’s medical bills.

Example 2: While the ship’s captain believes there’s enough room to clear a certain bridge, the water level is too high, and the bridge hits the wheelhouse as the boat attempts to navigate underneath. General liability insurance would cover the cost of repairing damage to the ship and bridge.

Example 3: Guests claim inclement weather ruined their trip and sue your company. General liability insurance would cover your legal costs to fight the lawsuit or settle out of court.

Other Types of Coverage Cruise Lines 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 cruise lines should obtain.

Commercial Property Insurance

If you own the buildings in which you operate your corporate headquarters and regional offices, commercial property insurance helps protect your business-related property in the event of a fire, burglary, or natural disaster. It covers the cost of repairing any structural damage to your buildings or grounds as well as repairing or replacing any business materials you store within them.

Workers’ Compensation Insurance

Cruise line workers face a variety of potential on-the-job hazards. 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 or death benefits stemming from a work-related accident.

Data Breach Insurance

Cruise lines collect and store a vast amount of customer data from online bookings. If your business loses sensitive client or company information as a result of a cyber attack, this coverage would help pay to restore your computer network, compensate customers for any related losses, and preserve your company’s reputation if you can quickly settle the repercussions of the hack.

Liquor Liability Insurance

Liquor liability insurance protects your company if guests damage your business property due to alcohol consumption. It also covers medical expenses and your legal costs if a customer causes bodily harm to themselves, another passenger, or an employee.

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. If you need to evacuate guests by helicopter after severe weather damages your ship, for example, this coverage can help pay for that unexpected expense. Commercial umbrella insurance also 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, workers’ compensation insurance, liquor liability insurance, and commercial property insurance.

Read our Business Insurance article for more info.

The initial investment needed to launch a cruise line is massive. There is a price tag of up to a billion dollars just for purchasing a cruise ship. Nevertheless, you can start by purchasing smaller used ships before upgrading to larger, more luxurious ones.

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

Ongoing expenses include cruise ship maintenance, employee wages/salaries, insurance, marketing, food, refreshments, cleaning supplies, and office costs.

Learn more about running a cruise line.

Cruise lines charge passengers fees for taking cruises.

Learn more about starting a cruise line.

A cruise line offers trips on large, ocean-going vessels. A cruise ship generally has a variety of restaurants and entertainment options for all ages, while some cruises focus on themes.

A cruise line’s profitability depends on customer demand and overhead costs.

Learn more about starting a cruise line.