Should I Start an LLC for My Ghost Tour Business?

Starting a limited liability company (LLC) for your ghost tour 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 a ghost tour business, lawsuits can arise from things like a customer or tour guide getting injured while on a ghost tour, as well as from copyright infringement and false advertising claims.

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

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

Do I Need an LLC for a Ghost Tour 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 a Ghost Tour Business

By starting an LLC for your ghost tour 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.

Ghost tour businesses will benefit from liability protection because of the risk of claims for personal injury as well as general business liability.

Example 1: You take a group of researchers on a ghost tour, and they realize that some pictures and descriptions on your website need to be more accurate as they do not exist in the tour area. They demand a partial refund for it. If they sue you, your business will be liable and not you.

Example 2: While on a ghost tour, your client steps on a cracked tombstone and falls. She claims you failed to guide her properly, which directly caused her to fall. She demands you pay her bills for the injury sustained. Your business may be affected if she sues you, but your private assets will remain safe.

Example 3: You take a group of students on an excursion. While showing them something scary, one student screams unexpectedly, causing a stampede. Another student is badly injured and decides to sue. Here, your business may be held liable to pay any compensation, but you will not be affected by the legal action.

Example 4: During a nighttime tour, a participant missteps in the dark and sprains their ankle. They sue you for failing to disclose the hazards on the tour.

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 Ghost Tour 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 a ghost tour 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

Ghost tour 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).

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?

Yes, all businesses need to have insurance. While the LLC protects only the business owner, business insurance will actually protect the business from potential risks. Ghost tour businesses need insurance to protect them from clients' and employees’ legal actions, injuries, property damage, etc.

Common Situations Business Insurance May Cover for a Ghost Tour Business

Example 1: Your ghost tour business often works with other local businesses to provide group packages and incentives. While touring your office, another business owner trips over a box, breaks an arm in the resulting fall, and demands your company pay for his medical care. General liability insurance would cover his medical treatment.

Example 2: While loading your tour van with special ghost-hunting equipment, an employee loses control of the dolly, and it crashes into a customer’s luxury car. The impact causes extensive damage, and the customer threatens to sue you. General liability insurance would cover the customer’s vehicle repair costs and the legal fees in the event of a lawsuit.

Example 3: A competitor sues you for libel. While you disagree with the libel claim, you know you need to hire an attorney. General liability insurance would pay for your legal fees and any required settlement.

Other Types of Coverage Ghost Tour 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 ghost tour businesses 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 or death benefits stemming from a workplace accident.

Commercial Auto Insurance

Any vehicle you use primarily for business — such as for transporting tour groups between haunted locales — requires commercial auto insurance to protect the vehicle, driver, and others on the road in the event of an accident. Be sure to select a policy that covers not only accident-related vehicle repair costs and medical treatment for anyone injured but also sufficient protection for any business materials you carry in your vehicle.

Data Breach Insurance

Also known as cyber liability insurance, this coverage protects your business from liability if a cybercriminal hacks into your computer system to steal sensitive customer data and your customers sue you for damages. In the event of such a lawsuit, data breach insurance would cover your legal fees and any settlement payouts.

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.

Read our Ghost Tour Business Insurance article for more info.

The cost of starting a ghost tour business is relatively low because it primarily involves walking people through “haunted” public areas. You can start for less than $3,000, including $500 for a website and $2,500 in advertising. Continuing your advertising campaign should cost less than $200 a month.

Visit our How to Start a Ghost Tour Business guide to learn more about the costs of starting and maintaining this business.

The ongoing expenses of running a ghost tour will largely be to cover marketing and advertising costs. Other expenses may include vehicle maintenance, employee salaries, and insurance fees.

Learn more about running a ghost tour business.

Ghost tour businesses make money by charging customers for their tour experience.

Learn more about starting a ghost tour business.

A ghost tour takes customers to local “haunted” attractions in their city and surrounding areas. Ghost tours are gaining in popularity, even outside of events like Halloween, and are typically successful in small towns or older buildings.

Ghost tour businesses, if well positioned, can make a healthy profit because of the low operating costs.

Learn more about starting a ghost tour business.