Should I Start an LLC for My Rock Climbing Gym?

Starting a limited liability company (LLC) for your rock climbing gym 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 rock climbing gym, lawsuits can arise from things like customers injuring themselves due to improperly installed and/or maintained climbing walls or breach of contract disputes with employees.

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

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

Do I Need an LLC for a Rock Climbing Gym?

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 Rock Climbing Gym

By starting an LLC for your rock climbing gym, 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.

Rock climbing gyms will benefit from liability protection because entertainment venues with an emphasis on physical activity, such as rock climbing gyms, present certain potential safety risks to visitors. Your marketing material also runs the risk of making your gym financially liable for trademark infringement or libel lawsuits.

Example 1: A client falls and severely injures himself while climbing a wall at your rock climbing gym. He is immediately rushed to the hospital for emergency treatment. He sues your company for defective equipment. In this instance, your liability to pay damages would be limited to the assets owned by your business and will not extend to you personally.

Example 2: An employee's negligence results in their early termination. He points to his contract, stating that he was unfairly fired before the terms of the contract concluded. If he files a lawsuit against your business, limited liability will ensure that your personal assets remain protected regardless of how the claim progresses.

Example 3: A group of teenagers enrolls for lessons at your rock climbing gym. Three months in, an altercation between two of them results in serious injuries caused by the use of some of your equipment. Their parents, while accepting their children's fault, sue you for negligence. With an LLC structure in place, your personal assets will remain safe from fines imposed by the court.

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 Rock Climbing Gym

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 rock climbing gym 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.

For questions about tax solutions for your rock climbing gym, we recommend scheduling a free tax consultation.

Credibility and Consumer Trust

Rock climbing gyms 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.

Rock climbing gyms need insurance in order to be safeguarded from lawsuits stemming from issues such as loss or damage of properties and personal injury.

Common Situations Business Insurance May Cover for a Rock Climbing Gym

Example 1: A member of your rock climbing gym is using a climbing wall when he slips and falls. He hits the ground hard enough to get a concussion and break his arm. While your gym may eventually be exonerated since the member assumed certain risks by using the climbing wall, there is still the possibility that he could file a lawsuit against your business. Your general liability insurance policy would pay for your legal fees, including the cost of a settlement if necessary.

Example 2: A visitor to the gym is taking a tour with one of your employees and accidentally slips and hits her elbow on the tile floor. She sustains a fracture and requires medical care. The general liability insurance policy you carry will likely cover her medical expenses.

Example 3: The new marketing material you have been circulating upsets one of your competitors, who claims that you are damaging her business. She decides to file a lawsuit against your business. The general liability insurance policy you have will pay for your legal fees as well as any settlements should you wind up settling the case outside of court.

Other Types of Coverage Rock Climbing Gyms 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 rock climbing gyms should obtain:

Commercial Property Insurance

The equipment you have in your gym, including your climbing equipment, safety equipment, and climbing walls, took a considerable investment to acquire. Should a major disaster strike your business, like a big fire, you could lose all of this equipment, and replacing it would be costly. A commercial property insurance policy helps pay for the replacement of your commercial property as long as it was damaged by a covered event.

Workers’ Compensation Insurance

A workers’ compensation insurance policy pays for medical treatment for work-related injuries. It also helps to cover lost wages when injured employees are unable to work. Most states require employers to carry workers’ comp insurance.

Commercial Umbrella Insurance

There is always the possibility that you will run into a situation where your general liability insurance policy limits are exceeded—like if you were to lose a big lawsuit. If this happens, an umbrella policy would pick up when the general liability insurance leaves off, so you are much less likely to need to cover damages out of your own pocket.

Product Liability Insurance

If your climbing gym sells any products, like climbing equipment, it can be useful to have product liability insurance to protect your business. Should a customer decide that one of the products you sold caused him or her injury—like if a piece of equipment failed while being used—and that customer filed a lawsuit, your product liability insurance would cover your legal costs to defend your business. It would also cover a settlement payment if necessary.

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 Business Insurance for Rock Climbing Gyms article for more info.

The nature of a rock climbing gym will require a multi-story workspace in an industrial area. The lease of such a place, business permits, remodeling expenses, signage, furniture, and other fixtures can range anywhere between $150,000 and $180,000.

Visit our How to Start a Rock Climbing Gym guide to learn more about the costs of starting and maintaining this business.

Costs are similar to most other standard businesses including utilities, marketing, and payroll. One unique cost to consider on an ongoing basis is the cost of maintaining and replacing the proper equipment.

Learn more about running a rock climbing gym.

Rock climbing gyms usually generate money through the sale of monthly or annual memberships to guests. Some gyms may also allow customers to pay for day-use admissions.

Learn more about starting a rock climbing gym.

Rock climbing gyms provide a safer environment for individuals to learn and practice their rock climbing skills. When gyms have a large number of return members and daily-use visitors, they have the potential to profit as much as $650,000 in a year.

Learn more about starting a rock climbing gym.