Should I Start an LLC for My Swim School?

Starting a limited liability company (LLC) for your swim school 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 swim school, lawsuits can arise from things like students injuring themselves while swimming, not providing customers with a contractually agreed-upon number of classes, or a customer being treated unfairly by an instructor.

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

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

Do I Need an LLC for a Swim School?

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 Swim School

By starting an LLC for your swim school, 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.

Swim schools will benefit from liability protection because of the risk of being sued for personal injuries, libel, and trademark infringement.

Example 1: One of the students at your swim school hits her head on the bottom of the pool, suffering a concussion, as a result of the improper marking of the dive lines (which demonstrate which areas are safe to dive in). This motivated the student to sue your business for the personal injury she suffered as a result of your negligence. Limited liability protects you from being held personally liable for any damages the court requires your business to pay her.

Example 2: A parent of one of the students at your swim school claims that their child has been treated unfairly by one of your coaches. As a consequence, she decided to sue your business for this discrimination. In the ensuing litigation, your personal assets are precluded from being used to provide the plaintiff with any settlements.

Example 3: Your swim school is sued for breach of contract after a client is not granted the number of swimming classes stated in your agreement. In this example, any obligation to pay damages that the court imposes on your business is limited solely to the assets of your business and cannot extend to you personally.

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 Swim School

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 swim school 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

Swim schools 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.

Due to the oftentimes dangerous nature of the industry in which swim schools operate, they are exposed to certain unique risks that threaten their financial assets. Insurance is vital for swim schools because it provides protection for these assets alongside peace of mind that they are safe.

Common Situations Business Insurance May Cover for a Swim School

Example 1: A student is walking from the locker room to the pool when she slips, falls, and hits her head. She sustains a concussion and requires medical care. Your general liability insurance will likely pay for her medical treatment.

Example 2: The parents of a potential student are visiting your facility when the father misses a step and falls, twisting his knee and requiring medical care. He decides to file a lawsuit against your business. The general liability insurance policy you carry will pay for your legal fees, including the cost of a settlement if you settle out of court.

Example 3: One of your competitors has accused your business of libel, claiming that you printed false claims against their business in your last advertising campaign. The general liability insurance policy you have will pay for your legal defense in the case of libel accusations. It will also pay for a settlement if necessary.

Other Types of Coverage Swim Schools 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 swim schools should obtain.

Professional Liability Insurance

As a professional swim instructor, it is important that you have liability insurance tailored to your job. Professional liability insurance is designed around the specific risks you face in your profession. If you are facing a lawsuit from a customer, such as if they claim your lessons were inadequate and caused them harm, your professional liability insurance will cover your legal fees.

Workers’ Compensation Insurance

The swim instructors you hire to help with your business need to be covered by workers’ compensation insurance, both so you can meet state legal mandates and for their own protection. It will pay for treating work-related injuries as well as help cover lost wages due to work-related injuries.

Commercial Auto Insurance

If you have a vehicle that you use primarily for business, such as traveling to different locations to teach swimming lessons, then you need commercial auto insurance. It will ensure that you meet the legal requirements for commercial vehicles in your state and will provide financial help in the event of an accident — both for property damage and for medical treatment for injuries.

Commercial Umbrella Insurance

An umbrella policy picks up where a general liability policy leaves off. So, if you find yourself in a situation where the limits of your general liability policy are exceeded, such as losing a big lawsuit, your umbrella policy would begin to pay for damages.

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 and workers’ compensation insurance.

Read our Swim School Business Insurance article for more info.

Owners of swim schools should prepare to need to pay up to $15,000 in startup costs in order to launch their business. The largest component of this startup cost is likely to be the pool. One of the most economic options is to rent lanes from a local gym or school. In addition, you will be required to obtain appropriate licensing and insurance.

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

You will need to pay your staff and ensure that you pay for pool equipment and pool space.

Learn more about running a swim school.

Swim schools charge students for swimming lessons.

Learn more about starting a swim school.

Swimming is a skill that most parents want their children to learn, both for safety and recreation. That makes this a good business for almost any community. However, swim schools generally do better in cities and towns close to water where kids can try out their new skills.

Profits depend on the number of students and your overhead costs.

Learn more about starting a swim school.