Should I Start an LLC for My Drive-In Movie Theater?

Starting a limited liability company (LLC) for your drive-in movie theater 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 drive-in movie theater, lawsuits can arise from things like breach of duty of care claims (e.g., a customer’s car gets vandalized as a result of you not having adequate security, etc.).

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

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

Do I Need an LLC for a Drive-In Movie Theater?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should start 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 Drive-In Movie Theater

By starting an LLC for your drive-in movie theater, 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.

Drive-in movie theaters will benefit from liability protection because of the risk of damage to customers’ vehicles, burns and scalds from concessions, minor accidents, and financial data breaches.

Example 1: While an employee is attempting to fix a projector, he accidentally knocks it over and causes it to fall a great height onto a customer that was walking nearby. If the customer were to sue your business for the bodily harm he suffered, limited liability would ensure you cannot be held personally accountable.

Example 2: An employee of your business was exiting your drive-in movie theater when he collided with a customer’s vehicle in the crowd, causing irreparable damage to it. As a result, the customer sued your business for this property damage. In this case, any responsibility to pay damages can only be imposed on your business’s assets.

Example 3: In order to afford the expensive equipment required to get your drive-in movie theater started, you take out a large business loan. However, after your theater proves relatively unpopular, it becomes clear you are not making enough profit to be able to repay this loan. Consequently, the creditor sues you for defaulting on this debt. If the court requires your business to pay damages to the creditor, these are limited from being imposed on your personal assets.

Example 4: An electrical fire causes damage to your speakers as well as a nearby customer's truck. You must replace the speaker and pay damages to the affected customer.

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 Drive-In Movie Theater

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 drive-in movie theater 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

Drive-in movie theaters 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 dependable 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?

As is true for all businesses, LLCs need business insurance. In particular, drive-in movie theaters require insurance because they have numerous valuable assets (e.g., the theater itself, the screens, and the projectors) that must be protected from a business’s natural liabilities.

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

Common Situations Business Insurance May Cover for a Drive-In Movie Theater

Example 1: A customer walks to your snack bar and trips on a speaker cord from another vehicle. As they fall, they break a wrist and hit their head. General liability insurance would cover their medical expenses as well as legal fees and any awarded settlement if they decide to sue.

Example 2: A parking spot with a broken speaker system needs its entire mechanism replaced. As an employee brings the new equipment over in a cart, they lose control of the cart, and it hits a customer’s car. The impact damages a door. General liability coverage would cover the vehicle repair costs.

Example 3: While installing an ice cream machine in your snack bar, a vendor slips on the wet floor and injures their ankle. The vendor is upset that no “caution” sign was visible and threatens to sue. Your general liability policy would pay for the vendor’s medical bills and your legal fees if the claim goes to court.

Other Types of Coverage Drive-In Movie Theaters 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 drive-in theaters should obtain.

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.

Commercial Property Insurance

If you own the lot and storage buildings used for your drive-in theater, 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 specialized equipment and other business property after an accident so you can reopen as soon as possible.

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.

Data Breach Coverage

If you offer a rewards program for your returning customers, you’re responsible for securely storing any personal data they provide as part of that membership. In the event of a cyber-attack or other data security issue, data breach insurance would cover your legal fees and any damages from a resulting lawsuit.

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 Drive-In Movie Theater Business Insurance article for more info.

Those wishing to start a drive-in movie theater face a very steep startup cost. You can expect to need between $250,000 and $1 million. This money will be used to construct the property you purchased for this purpose, including a projection house, sound system, and concession stand (among other things).

Visit our How to Start a Drive-In Movie Theater guide to learn more about the costs of starting and maintaining this business.

Once your drive-in movie theater is off the ground, costs will include payroll, film licensing fees, insurance, and concession supplies.

Learn more about running a drive-in movie theater.

Drive-in movie theaters make money by selling movie tickets and concessions.

Learn more about starting a drive-in movie theater.

Drive-in movie theaters are well suited for a variety of locations. In addition to more rural areas, there are many empty commercial zones in suburban areas that require investment and could make great locations for a drive-in movie theater.

You will have to offset your operational expenses with sales from concessions (roughly 50% to 80% of your profits) and tickets.

Learn more about starting a drive-in movie theater.