Do I Need an LLC for My Event Planning Business?
Starting a limited liability company (LLC) for your event planning 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 event planning business, lawsuits can arise from things like an unhappy client claiming that you’ve neglected your duties (e.g., by not following your agreed-upon contract, etc.).
LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your event planning business seem more credible.
Recommended: Use Northwest to form an LLC for $29 (plus state fees).
Should I Start an LLC for an Event Planning Business?
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 an Event Planning Business
By starting an LLC for your event planning 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.
Event planning businesses will benefit from liability protection because of the risk of personal injuries, property damage, trademark infringement, and more.
Example 1: You are happy with the new logo for your business and begin to use it in all of your promotional materials. Unfortunately, one of your competitors feels like the new logo is too similar to their logo and files a lawsuit against your business over the issue. Should you be found in the wrong, your personal assets as the owner cannot be taken in the settlement since your business is an LLC and they are protected with limited liability.
Example 2: While going over options in your office, a client trips on some furniture and breaks their nose. They ask for your business to pay for the medical bills. Your personal assets are protected from being used to pay for this since limited liability as an LLC covers them.
Example 3: An outdoor event you help plan gets rained out, leading to heavy financial losses for both your business and your client. They intend to sue you for the event being a failure. The settlement reached cannot affect your personal assets as the owner due to them being protected with limited liability from your business’s LLC status.
Example 4: You are happy with the new logo for your business and begin to use it in all of your promotional materials. Unfortunately, one of your competitors feels like the new logo is too similar to their logo and files a lawsuit against your business over the issue.
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 Event Planning 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 event planning 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
Event planning 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).
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
- Alabama LLC
- Alaska LLC
- Arizona LLC
- Arkansas LLC
- California LLC
- Colorado LLC
- Connecticut LLC
- Delaware LLC
- Florida LLC
- Georgia LLC
- Hawaii LLC
- Idaho LLC
- Illinois LLC
- Indiana LLC
- Iowa LLC
- Kansas LLC
- Kentucky LLC
- Louisiana LLC
- Maine LLC
- Maryland LLC
- Massachusetts LLC
- Michigan LLC
- Minnesota LLC
- Mississippi LLC
- Missouri LLC
- Montana LLC
- Nebraska LLC
- Nevada LLC
- New Hampshire LLC
- New Jersey LLC
- New Mexico LLC
- New York LLC
- North Carolina LLC
- North Dakota LLC
- Ohio LLC
- Oklahoma LLC
- Oregon LLC
- Pennsylvania LLC
- Rhode Island LLC
- South Carolina LLC
- South Dakota LLC
- Tennessee LLC
- Texas LLC
- Utah LLC
- Vermont LLC
- Virginia LLC
- Washington LLC
- Washington D.C. LLC
- West Virginia LLC
- Wisconsin LLC
- Wyoming LLC
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 protect their business assets — even LLCs. This is because limited liability protection from being an LLC protects your personal assets, not your business assets.
Event planning businesses need insurance because of the liability involved giving advice and plans to clients. If something goes wrong or someone is injured, insurance can help cover the costs involved.
Common Situations Business Insurance May Cover for an Event Planning Business
Example 1: A customer is walking into your office and doesn’t see a patch of ice outside your entryway. He slips and breaks his arm. He takes legal action against your business, holding you responsible for his injuries. The general liability insurance policy you carry will pay for your legal fees when defending yourself against such a lawsuit. If you settle outside of court, your policy will pay for the settlement as well.
Example 2: One of your employees has a hand cart loaded with foldable tables that he is transferring from one part of your building to another. In his haste, he fails to notice a potential client visiting your business and hits her with the hand cart. She falls down and sustains serious injuries. Your general liability insurance policy would likely cover the costs of her treatment.
Example 3: You are happy with the new logo for your business and begin to use it in all of your promotional materials. Unfortunately, one of your competitors feels like the new logo is too similar to his own logo and files a lawsuit against your business over the issue. Because you have a general liability insurance policy, your legal defense fees in this situation would be covered by your insurer, as well as any settlement costs.
Other Types of Coverage Event Planning 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 event planning businesses should obtain.
Commercial Auto Insurance
Any vehicle you use primarily for business needs commercial auto insurance. The automobile you use to travel from client to client and event to event should have coverage so that you are meeting the legal mandate of your state for commercial vehicles. With this coverage, you or your employees will be protected if you get into an accident in the vehicle. If you or an employee cause an accident, the policy will help pay for repairs or replacement of the vehicle as well as any damage caused by your vehicle to other vehicles. It will also pay for medical care for the injured.
Professional Liability Insurance
Also known as omissions and errors insurance, professional liability insurance is tailored to your particular business to protect you against negligence claims due to mistakes or failure to perform. Although you do your best to plan events to meet or even exceed the expectations of your clients, there are still times when things do not go according to plan. If a client takes legal action against your business due to a mistake, your professional liability insurance will cover your legal fees and the cost of a settlement if one is necessary.
Workers' Compensation Insurance
Most states require that businesses with employees carry workers’ compensation insurance. Your workers’ comp insurance will cover your employees if they are injured performing work-related duties. For instance, if an employee is carrying folding tables to an event and sustains a back injury, she can get medical care through workers’ comp. If she is unable to work, workers’ comp insurance will help pay her lost wages while she is recovering.
Commercial Umbrella Insurance
The general liability insurance policy you carry offers a great foundation to protect your business, but there are circumstances where your general liability policy limits can be exceeded. For example, if your company is sued and you lose the lawsuit, the damages you are required to pay could exceed your coverage limits. If you have commercial umbrella insurance, your umbrella policy will pick up where the general liability policy leaves off.
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 auto insurance.
Read our Event Planner Insurance article for more info.
An event planning business can have a fairly low overhead in the beginning. If you are based from home, you will avoid extra rent and utilities costs. Other costs will include:
- Business website and site hosting
- Internet and phone service
- Advertising and marketing
- Payroll
- Equipment
- Business licenses and taxes
- Insurance
Visit our How to Start an Event Planning Business guide to learn more about the costs of starting and maintaining this business.
Equipment rental, marketing, event publicity, and employee salaries are some of the regular costs of an event planning business.
Learn more about running an event planning business.
An event planning business makes money by charging clients to plan and execute events.
Learn more about starting an event planning business.
Event planners help clients plan and execute events of all kinds, from weddings to corporate retreats. The job of an event planner is to make sure the event runs smoothly, and the event planning business deals with any problems that arise.
The profits of an event planning business depend on how many events it holds every year and the type of clientele it attracts.
Learn more about starting an event planning business.
