Should I Start an LLC for My Haunted House?

Starting a limited liability company (LLC) for your haunted house 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 haunted house, lawsuits can arise from things like an employee accidentally leaking your customer’s sensitive information, property damage disputes with your insurance provider, or personal injury claims.

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

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

Do I Need an LLC for a Haunted House?

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 Haunted House

By starting an LLC for your haunted house, 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.

Haunted houses will benefit from liability protection lawsuits related to personal injuries, property damage, trademark infringement, copyright infringement, and general business risks.

Example 1: A customer gets injured while exploring your haunted house and sues your business for failing to provide a safe environment. With limited liability protection, your personal assets will be shielded from the damages incurred by the lawsuit.

Example 2: A stray electrical spark from your haunted house’s display causes a fire in the neighborhood, damaging neighboring properties. With limited liability protection, you will not be held personally liable for the damages incurred by any of these homeowners.

Example 3: An employee maliciously accesses your business’s financial data and exposes sensitive customer information in an attempt to damage your reputation. With limited liability protection, only your business assets will be liable for any costs incurred by this data breach.

Example 4: A customer walking through your haunted house trips over a loose floorboard in the dark and sustains injuries. She sues your business for medical compensation.

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 Haunted House

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 haunted house 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

Haunted houses 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?

All businesses need insurance to protect their business assets — even LLCs. This is because the limited liability protection from an LLC protects your personal assets, not your business assets.

Haunted houses can be fun, but they also have their own unique set of risks. For example, there are dangers like fires, slips, falls, and even injuries from scares gone wrong. That’s why it’s important for haunted house businesses to have insurance coverage.

Common Situations Business Insurance May Cover for a Haunted House

Example 1: A customer walking through a haunted attraction touches a live wire that wasn’t properly installed and suffers significant burns and electrical shock that require emergency medical attention. General liability insurance most likely would cover expenses related to the event, including medical fees and any legal suit filed against the business.

Example 2: As a touring visitor enters the haunted house, an employee reaches out to grab him, mistakenly touching the visitor and causing him to drop an expensive camera. General liability insurance may help cover the cost of the camera, depending on the value.

Example 3: A person walking through a haunted display has a stage prop fall on them. They fall and hit their head. While they don’t seem to have any medical emergency, the haunted house calls an ambulance to be on the safe side. Liability insurance helps cover losses related to any medical expenses and any lawsuits filed against the company.

Example 4: A touring customer fails to sign a liability waiver before entering the attraction, gets scared, and suffers a medical emergency on site. This could fall under general liability insurance if the employees failed to ensure that a waiver was signed, leading to a settlement for damages in a lawsuit. A liability waiver will only go so far in a court case. In short, the company can still be sued even if a waiver is signed.

Example 5: The haunted house owners use a term or phrase in their marketing materials that is a copyright infringement of another location. General liability insurance may cover the damages from a copyright infringement lawsuit.

Other Types of Coverage Haunted Houses 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 haunted houses should obtain:

Commercial Property Coverage

If you own the building that the haunted house operates in or the land you will set up the attraction on, having commercial property insurance is necessary. It aids in protecting the building itself as well as the attraction features from various types of risks. In a haunted house, each attraction, from the walls to the props, is vital to the operation of the business. Minimizing damage to any equipment is also important.

Workers’ Compensation Insurance

Most haunted houses employ numerous individuals. Some are placed in dangerous situations where they can slip and fall or suffer another injury. Workers’ compensation covers on-the-job injuries and illnesses to employees and minimizes financial loss.

Commercial Umbrella Insurance

Damages from an incident can be significant. For example, a customer suffering a hit to the head after tripping on the floor in the dark could potentially lead to an expensive lawsuit and settlement. Commercial umbrella insurance may help to defray those costs. It extends the amount of liability coverage beyond what the general liability insurance plan offers. It applies only when the limit of the general liability policy is exceeded.

Commercial Auto Insurance

Some haunted houses also use vehicles as a part of the attraction. A haunted forest or farm, for example, may pull employees through a field. These vehicles, whether they are high-powered tractors or full trucks, are valuable investments for the company. Because they are being used as a part of the business operation, companies should consider covering them with commercial auto insurance. This helps protect the vehicle’s value if an accident occurs and minimizes general liability claims.

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 Haunted House Business Insurance article for more info.

Opening a haunted attraction can range greatly in cost, depending on the type of experience offered. Some attractions may require hundreds of thousands of dollars to secure a space, such as an old jail or asylum, while portable attractions that can be set up at carnivals may only need around $10,000 for setup and additional expenses.

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

The ongoing expenses associated with running a haunted house business include property management costs, costume maintenance, music licensing, labor costs, a local fire permit, and insurance.

Learn more about running a haunted house.

Haunted houses charge people an entry fee. Some established haunted houses also create and sell merchandise to their customers.

Learn more about starting a haunted house.

Haunted house businesses typically operate for just a few months each year, but they can still generate a strong profit. Big haunted house businesses can earn up to $3 million per year while smaller haunted houses typically earn about $50,000.

Learn more about starting a haunted house.