Should I Start an LLC for My Tarot Reading Business?
Starting a limited liability company (LLC) for your tarot reading 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 tarot reading business, lawsuits can arise from things like allegations of misrepresentation (e.g., where a reading is inaccurate) or claims that negligence has caused the personal injury suffered by customers on your premises.
LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your tarot reading business seem more credible.
Recommended: Use Northwest to form an LLC for $29 (plus state fees).
Do I Need an LLC for a Tarot Reading 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 Tarot Reading Business
By starting an LLC for your tarot reading 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.
Tarot reading businesses will benefit from liability protection because of the risk of being sued for personal injuries to customers or libeling other businesses.
Example 1: Your tarot reading business signs a contract promising to provide a certain number of readings as part of a package. Unfortunately, after a client could not attend a couple of these readings due to an illness, they sued your business for breach of contract after it refused to grant the customer these readings they missed. Limited liability prevents you from being held personally liable for any obligation the court imposes on your business to pay damages.
Example 2: After an employee at your tarot reading business predicted a client would soon acquire a small fortune. On the back of this prediction, the client made a number of irresponsible financial decisions until they later realized the reading was false. As a result, the client filed a lawsuit against your business for negligent misrepresentation. In the ensuing lawsuit, your personal assets remain protected from any business requirement to pay the plaintiff damages.
Example 3: While using the toilet at your tarot reading business, a customer slips on a wet floor and injures their head. In search of compensation, the customer decides to file a lawsuit against your business for this personal injury. In the event that the court awards the plaintiff damages, these can only be levied against your business’s assets.
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 Tarot Reading 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 tarot reading 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
Tarot reading 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 loans, grants, 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
- Alabama LLC
- Alaska LLC
- Arizona LLC
- Arkansas LLC
- California LLC
- Colorado LLC
- Connecticut LLC
- Delaware LLC
- Florida LLC
- Georgia LLC
- Hawaii LLC
- Idaho LLC
- Illinois LLC
- Indiana LLC
- Iowa LLC
- Kansas LLC
- Kentucky LLC
- Louisiana LLC
- Maine LLC
- Maryland LLC
- Massachusetts LLC
- Michigan LLC
- Minnesota LLC
- Mississippi LLC
- Missouri LLC
- Montana LLC
- Nebraska LLC
- Nevada LLC
- New Hampshire LLC
- New Jersey LLC
- New Mexico LLC
- New York LLC
- North Carolina LLC
- North Dakota LLC
- Ohio LLC
- Oklahoma LLC
- Oregon LLC
- Pennsylvania LLC
- Rhode Island LLC
- South Carolina LLC
- South Dakota LLC
- Tennessee LLC
- Texas LLC
- Utah LLC
- Vermont LLC
- Virginia LLC
- Washington LLC
- Washington D.C. LLC
- West Virginia LLC
- Wisconsin LLC
- Wyoming LLC
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.
For tarot reading businesses, insurance is incredibly beneficial due to the financial stability it provides. Furthermore, providing readings regarding a customer’s future can open your business up to certain unique liabilities that can put your assets at risk. However, with insurance, the costs associated with these risks can often be offset by an insurance agency.
Common Situations Business Insurance May Cover for a Tarot Reading Business
Example 1: A client trips on your steps, breaking her cheekbone, and then files a lawsuit to cover the cost of her surgery. General liability insurance would pay for your legal fees and any damages awarded in a settlement.
Example 2: A local competitor claims you slandered her business and decides to sue. General liability insurance would cover your legal fees and any damages awarded in a settlement.
Example 3: As you tour a client’s home before reading, you accidentally trip over her dog and fall into her 70-inch television. General liability insurance would cover the cost of damages to your customer’s property.
Other Types of Coverage Tarot Reading 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 tarot reading businesses should obtain.
Professional Liability Insurance
If a client decides the reading you gave caused them injury and files a lawsuit, professional liability insurance would cover your legal fees as well as any damages awarded in a settlement.
Home-Based Business Insurance
If you conduct most readings in your home, check with your homeowner's insurance provider to ensure your policy protects you against liability from business-related accidents. If not, consider adding home-based business coverage to your business owner’s policy (BOP) or your existing home insurance policy.
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.
Commercial Auto Insurance
Any vehicle you use primarily for business requires commercial auto coverage. Your policy will protect your vehicle, the driver, and others on the road in the event of an accident by covering any related vehicle repair costs as well as medical treatments for anyone injured.
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 professional liability insurance.
Read our Tarot Reading Business Insurance article for more info.
If you are an owner of a tarot reading business, very little initial capital is required in order to launch it. As little as $5,000 will often suffice. This will be enough to cover a computer, phone, internet, a good deck of cards, a mobile tent, and a good business website.
Visit our How to Start a Tarot Reading Business guide to learn more about the costs of starting and maintaining this business.
Marketing, website maintenance, some accounting, and perhaps some travel will constitute the bulk of your ongoing expenses.
Learn more about running a tarot reading business.
Tarot reading businesses make money by charging clients for tarot card readings. Overhead is minimal, so your reputation is key to making a profit.
Learn more about starting a tarot reading business.
Tarot readers can work either part-time or full-time. The profit of a tarot reading business depends directly on the size of its customer base. Some tarot readers have their own shops, while others set up booths at fairs, festivals, and private events.
Another option for a tarot reading business is conducting online sessions via video conferencing.
Learn more about starting a tarot reading business.
