Should I Start an LLC for My Movie Theater?

Starting a limited liability company (LLC) for your 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 movie theater, lawsuits can arise from things like showing copyrighted films without permission or mishandling customers’ financial data.

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

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

Do I Need an LLC for a 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 Movie Theater

By starting an LLC for your 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.

Movie theaters will benefit from liability protection because of the risk of workplace accidents, trademark infringement, and financial data breaches.

Example 1: Your movie theater is sued by a distributor who alleges payment for a number of blockbusters is outstanding. You maintain that payment depends on the number of people who watch the movie. If you lose the case, the judgment will only affect your business assets; your personal assets will not be involved.

Example 2: Your movie theater is suffering from a cash-flow problem that makes it difficult to service a long-term loan. If the lender takes legal action, be assured your personal assets would be safe.

Example 3: A dramatic fall in viewership prompts you to consider closing your movie theater. Sadly, negative equity means that not all creditors can be paid. Nonetheless, creditors cannot go after your personal assets; your personal assets are protected by the limited liability shield of your LLC.

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 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 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

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 professional 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.

A movie theater is at risk for claims of personal injury: many people come and go, increasing that possibility. General liability insurance will cover such situations; it will also cover property damage and many other risks.

Common Situations Business Insurance May Cover for a Movie Theater

Example 1: A patron slips on the stairs on the way up to his seat, falling forward and sustaining injuries to his knee and wrist. Your general liability insurance policy will cover the cost of treating the guest’s injuries, up to your policy limits.

Example 2: An employee forgets to put out a “Wet Floor” sign in the bathroom after mopping. A guest slips and falls on the wet tile, sustains injuries, and decides to file a lawsuit against your theater. A general liability insurance policy will pay for the cost of defending yourself from the lawsuit. It will also pay the cost of settling with the injured party if necessary.

Example 3: An employee at the concession stand fails to hear a customer mention a food allergy. The employee serves the customer food containing the allergen. The customer has a severe reaction that requires medical attention and subsequently files a claim against your business for damages. Your general liability insurance will cover your legal costs, up to your policy limits.

Other Types of Coverage 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 movie theaters should obtain.

Commercial Auto Insurance

Since you will be driving your business vehicle on public roadways, you are mandated by the state to carry a commercial auto policy. Auto insurance protects not only your vehicle but any liability you may have in an accident. Your personal car insurance will not cover you if you are driving the business vehicle, even if you are off duty.

Commercial Property Insurance

If you own your location instead of renting, you need commercial property insurance to protect the building. Property insurance also covers items owned by your business.

Movie theaters invest heavily in the equipment that is used to complete their work. Be sure that you have enough coverage to replace all of your equipment in the case of a loss. This coverage is generally offered in a Business Owner Policy (BOP).

In addition to the policies outlined above, there are a few other types of coverage your movie theater may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.

Workers' Compensation Insurance

If your movie theater has any employees (full-time or part-time), you are legally required to carry workers’ compensation insurance. This type of coverage will help compensate your employees in the case that they get injured on the job.

Read more about workers’ compensation insurance.

Business Interruption Insurance

In the event of a fire, flood, or other catastrophes, there is a good chance your business operations will be halted for some time. Business interruption coverage is designed to help you recoup a portion of the revenue your business would lose due to the inability to operate.

This type of insurance is typically included in a business owner’s policy.

Commercial Umbrella Insurance

Umbrella coverage allows you to extend above and beyond the standard limits of your other business insurance policies. If you are faced with a large lawsuit or other claim situation, there’s a possibility that the coverage limits of your standard policies will be insufficient. In this case, your umbrella policy will allow you to surpass these limits.

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 Movie Theater Business Insurance article for more info.

Opening a movie theater is a costly undertaking. Starting from scratch, it will cost at least $10 million for 12 screens. Running costs will vary depending on scale, and will include rent or mortgage payments, salaries, utilities, and commercial insurance.

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

Some of the operating expenses for a movie theater include payroll, rent or mortgage payments, utilities, and film rights.

Learn more about running a movie theater.

Movie theaters make money by charging customers to watch movies and by selling concessions.

Learn more about starting a movie theater.

The film industry brings in billions of dollars each year. Even with the increasing popularity of streaming-from-home services, many movie theaters still enjoy a steady stream of profit.

Opening a movie theater is an expensive endeavor. But with the right location, this could potentially be a profitable business.

Learn more about starting a movie theater.