Should I Start an LLC for My Tennis Shop?

Starting a limited liability company (LLC) for your tennis shop 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 tennis shop, lawsuits can arise from things like defaulting on a business loan, unintentionally defaming a local competitor, or property damage suffered by customers on your premises.

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

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

Do I Need an LLC for a Tennis Shop?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form 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 Tennis Shop

By starting an LLC for your tennis shop, 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.

Tennis shops will benefit from liability protection because of the risk of being sued for property damage, libel, and personal injuries.

Example 1: While driving her car into your tennis shop’s car park, the customer drives over a huge pothole in the entrance that causes her car to suffer a puncture. Due to the value of her car, the customer decides to sue your business for the property damages she alleges were caused due to its negligence. In this example, you are protected from being held personally responsible for paying the plaintiff damages by limited liability.

Example 2: In order to launch your tennis store, you decided to take out a large loan to help with the cost of choosing a storefront in a high-traffic area. However, after an economic downturn greatly affects your business’s profitability, it is no longer able to repay this loan. As a consequence, the creditor filed a lawsuit against your business for defaulting on this debt. Limited liability ensures your own assets cannot be used for satisfying any compensation.

Example 3: As part of a marketing maneuver to grow demand for your tennis shop, an employee posts a popular meme on your business’s social media that mocks a local competitor. This drove the competitor to sue your business for libel, arguing that this post had severely negatively affected their reputation. In the following lawsuit, any damages that are awarded to the plaintiff cannot be levied against your personal 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 Tennis Shop

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 tennis shop 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

Tennis shops 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.

The primary benefit that insurance offers a tennis shop is protection against financial losses. If your business were to be faced with any financial consequences as a result of an unexpected incident, your assets would remain safe and protected.

Common Situations Business Insurance May Cover for a Tennis Shop

Example 1: You fail to lock the shop up properly at the end of the evening, and a thief steals your clients’ personal property left in your possession. Your general liability insurance would cover the cost to replace their equipment.

Example 2: You post a negative tweet about one of your competitors. They have named your business in a lawsuit, claiming their business has suffered as a result. General liability insurance would cover your legal fees and any damages awarded by the court in a defamation lawsuit.

Example 3: A customer’s child trips over a display while running around the shop. The parents have named your business in a lawsuit, where they are seeking repayment for medical bills. General liability insurance would cover this claim.

Other Types of Coverage Tennis Shops 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 tow truck companies should obtain.

Commercial Property Insurance

As a shop owner, you have invested heavily in your physical location, business property, and merchandise. A commercial property insurance policy protects those investments, paying claims stemming from a covered loss. When a loss such as fire or theft occurs, this insurance will pay the cost to repair and/or replace business-owned property. Owners should work with their agents to determine appropriate coverages and limits, considering the cost to replace everything, should a total loss occur.

Professional Liability Insurance

If your shop offers advice or lessons as part of its services, you may want to consider purchasing a professional liability insurance policy. If a customer files a lawsuit against the shop, claiming they were harmed due to your professional negligence, they may take you to court for damages. This policy, also known as Errors and Omissions (E & O) insurance, would cover the cost of attorney’s fees, as well as court-awarded damages, up to the limits of the policy.

Workers’ Compensation Insurance

Workers’ compensation insurance is a (typically) state-mandated coverage required for all businesses with full and/or part-time employees. If an employee is injured while on the job, it covers their medical bills and a portion of their lost wages. If your business is named in a lawsuit as a result of this claim, the policy would also cover your legal expenses as the business owner.

Commercial Auto Insurance

The state mandates that a commercial auto policy is in place for all automobiles driven for business purposes. If you or a member of your team are involved in an auto accident, this policy will cover the cost to replace/repair damaged property and pay for third-party claims and lost equipment. Since many auto accidents result in significant damage, it is recommended that you discuss your need for limits higher than the state-mandated minimum requirement.

Business Interruption insurance

If you face a significant property loss, your business could be out of commission for months. With no income coming in, enterprises without business interruption insurance could be forced to close their doors forever. This policy, also known as business income and extra expense insurance, will help cover the cost of moving to a temporary location, provide coverage for associated extra expenses, and help supplement lost income during the recovery time.

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 article for more info.

To start your tennis shop, the primary expense will be acquiring the appropriate inventory. Finding a good balance between the brands you plan to sell and your target customer base is crucial. Additionally, expenses for the physical space and advertising to attract customers must be considered.

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

The primary ongoing expenses for a tennis shop include rent/mortgage, payroll, insurance, and inventory.

Learn more about running a tennis shop.

A tennis shop sells products at a markup and charges fees for services like tennis lessons and equipment repair.

Learn more about starting a tennis shop.

A tennis shop sells tennis equipment and related accessories. It also may provide services like restringing tennis rackets. In addition, a tennis shop may have a pro available to provide advice for budding tennis players.

Profits for tennis shops can be substantial, depending on clientele and sales volume.

Learn more about starting a tennis shop.