Last Updated: May 10, 2024, 9:53 am by TRUiC Team

Should I Start an LLC for My Music Lessons Business?

Starting a limited liability company (LLC) for your music lessons 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 music lessons business, lawsuits can arise from things like false advertising (e.g., concerning a music instructor’s skill level, etc.).

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

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

person learning how to play piano

Do I Need an LLC for a Music Lessons 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 Music Lessons Business

By starting an LLC for your music lessons 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.

Music lessons businesses will benefit from liability protection because, in situations where customers are attending lessons at your location or you are visiting their homes, it will be important for you to protect yourself and your business. 

Example 1: Your music lessons business is sued by a vendor who claims you owe him money for supplies. You retort you did not place an order for the supplies. Regardless, if you lose in court, the judgment can only be satisfied from business assets. Your personal assets are protected. 

Example 2: Your music lessons business fails to make payments on a bank loan, and the bank takes you to court. It’s likely the bank will be able to garner your business bank account, but it cannot garner your personal bank account, since your personal assets are protected. 

Example 3: A fall in demand for music lessons causes you to close the business. Since your business debts are more than your business assets, some creditors will have to go unpaid. Nonetheless, creditors cannot go after your personal assets, which are protected by the limited liability shield of the company.

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 Music Lessons 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 music lessons 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

Music lessons 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 loansgrants, 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 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 music lessons business will need general liability insurance to cover claims of personal injury, property damage, and a number of other perils.

Common Situations Business Insurance May Cover for a Music Lessons Business

Example 1: As a student walks into your restroom, he slips on a wet spot on the floor, breaks his tailbone, and asks you to cover his medical care. General liability insurance would pay for his medical treatment.

Example 2: While visiting a potential student’s home to discuss music lesson options, you trip over her cat, fall into her entertainment center, and smash her large television. General liability insurance would cover the cost of replacing her damaged property.

Example 3: As a student and his mother enter your place of business from the parking lot, the mother trips on a pothole, breaks an ankle, and decides to sue your business. General liability insurance would pay for your legal defense and any required settlement.

Other Types of Coverage Music Lessons 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 music lessons businesses 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. If your business is based out of your home, your homeowners' insurance will not cover the home when it is being used for commercial purposes. Property insurance also covers items owned by your business.

Music lessons businesses invest heavily in the equipment that is used to complete their work. Be sure that you have enough coverage to replace all of your tools 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 music lessons business 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 music lessons business 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.

Read our Business Insurance for Music Lessons Businesses article for more info.

It doesn’t require much capital to start a music lessons business. The chief outlay will be on instruments, which could set you back around $2,000, if you use an electronic keyboard instead of a traditional piano. Ongoing expenses for a home-based operation will be next to nothing. 

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

Expenses for your music lessons business will include your facility or transportation to client homes, equipment, marketing, tax, and business structure expenses. Other expenses will include any ongoing maintenance of equipment, replacement of equipment, and supplies for lessons.

Learn more about running a music lessons business.

Music lessons businesses are compensated for the lessons they offer students. There are different ways to structure the pricing, either by the lesson, per hour, or even in group lessons.

Learn more about starting a music lessons business.

Setting up a business offering music lessons can allow you to start with low overhead and enable you to grow at the speed that works for you and your business.

The profit margin of your new music lessons business will depend on how much overhead you create when you start your business. If you are performing lessons from your home, then your profit margin can be over 60% of your lessons. 

Learn more about starting a music lessons business.

Related Articles

Article Sources

IRS: Limited Liability Company

IRS: S Corporations


SBA: Small Business Guide

SBA: Choose a Business Structure Guide

US Census Bureau: Small Business Statistics

SBA Office of Advocacy: Data on Small Business

FRED: SBA Data for Small Business