Should I Start an LLC for My Sports Bar Business?

Starting a limited liability company (LLC) for your sports bar 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 sports bar, lawsuits can arise from things like defaulting on a bank loan, customers becoming ill after drinking contaminated beverages, and intentional misrepresentation of the services offered by the bar.

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

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

A group of sports fans cheering around a sports bar table

Do I Need an LLC for a Sports Bar?

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 Sports Bar

By starting an LLC for your sports bar, 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.

Sports bars will benefit from liability protection because of the risks associated with selling alcohol. Sports bars can potentially be held liable for accidents their customers have after drinking at the bar, which could be very costly.

Additionally, there is the risk of product liability, workplace accidents, trademark infringement, and financial data breaches.

Example 1: An employee at your business often advertised that your sports bar had access to certain channels that were not typically available when in reality, it did not. This prompted a customer to sue your business for fraud. In the ensuing court case, only your business’s assets may be seized by the court in order to satisfy any damages it awards the plaintiff.

Example 2: After drinking a soda that was served at your sports bar, a customer became severely ill. He later realized that the drink contained a toxic contaminant that had caused this illness. As a result, he filed a negligence lawsuit against your sports bar to recoup his medical expenses. In this example, your personal assets would be protected from being used to satisfy any business obligation to pay damages.

Example 3: Your sports bar decides to withdraw a loan from the bank so that it can renovate its establishment. However, after a few months, it falls on hard times and is unable to continue repaying this loan. As a result, the bank sues your business for defaulting on this loan. Limited liability protects you from being held personally responsible for satisfying any debts your business owes its creditors.

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 Sports Bar

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 sports bar 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

Sports bars 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. This is of specific importance to sports bars because of how valuable their assets are (such as their liquor licenses and building properties).

Common Situations Business Insurance May Cover for a Sports Bar

Example 1: When a customer returns after closing to claim a forgotten jacket, he slips on the wet floor and shatters his elbow. He asks you to cover his hospital bills. General liability insurance would pay for the customer’s medical expenses.

Example 2: As a group of investors inspects your new shelving display behind the bar, one of them reaches for a bottle and accidentally pulls down the entire display. The crash seriously injures several people. General liability insurance would pay for the investors’ accident-related medical bills.

Example 3: A local rival believes your new logo infringes on their copyright and sues. General liability insurance would cover your legal fees and any damages awarded in a settlement.

Other Types of Coverage Sports Bars 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 sports bars 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 work-related accident.

Commercial Property Insurance

You’ve made major investments to outfit your bar with the most comfortable furniture, high-tech gadgets, and other important business equipment. If you own the building in which you operate, you’re responsible for all business-related property housed there in the event of a fire, burglary, or natural disaster. Commercial property insurance would cover the cost of repairing or replacing your furniture and other business equipment after an accident so you can recover quickly.

Business Interruption Insurance

If a fire, tornado, or other major disaster forces you to temporarily close, business interruption insurance would help cover your bills and financial losses until you can reopen. You can usually purchase business interruption insurance as part of a business owner’s policy or BOP.

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, workers’ compensation insurance, and commercial property insurance.

Read our Sports Bar Business Insurance article for more info.

While the average cost of starting up a sports bar is around $400,000, it can range from anywhere between $100,000–$1 million. This figure will cover the main costs of renting a property (or constructing one), acquiring your liquor license (which varies greatly depending on location and local laws), and the build-out of your bar.

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

Restocking food and drinks, utilities, payroll, and maintenance are the primary ongoing expenses of a sports bar.

Learn more about running a sports bar.

Sports bars make money by selling food and drinks for customers.

Learn more about starting a sports bar.

A sports bar provides a relaxed, fun atmosphere for people to enjoy drinks and watch sporting events. Most sports bars have a large number of televisions placed around the facility so that everyone has a good view and several sports programs can be shown at once. Most sports bars also serve food.

Location, size, and customer volume determine profits.

Learn more about starting a sports bar.