What are the costs to start and maintain a theatre company?

Starting a theatre company can be quite expensive, depending on whether you can find people to donate their time for rehearsals and performances. Other startup costs include: Purchasing props and costumes Getting a lease for a suitable space Purchasing (or developing) new scripts When it comes to maintenance, labor, costuming costs, and rent will likely be your largest costs. Visit our How to Start a Theatre Company guide to learn more about the costs of starting and maintaining this business.

Should I Start an LLC for My Theatre Company?

Starting a limited liability company (LLC) for your theatre company 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 theatre company, lawsuits can arise from things like copyright infringement complaints, lease disputes, and actors getting injured.

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

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

Do I Need an LLC for a Theatre Company?

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 Theatre Company

By starting an LLC for your theatre company, 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.

Theatre companies will benefit from liability protection because of the risks associated with the facility where your audience watches shows. Additional concerns include potential contract disputes and trademark infringement risks.

Example 1: Your business takes on a large business loan in order to hire more actors and finance the development of a new theatrical production. When it is unable to keep up with the creditor’s agreed payments, your LLC faces a breach of contract lawsuit. Since you didn’t personally guarantee the loan, your personal assets will remain shielded from the claimant.

Example 2: When one of your employed actors falls down and gets injured during one of your business’s theatrical performances, he files a medical damages lawsuit against your LLC. Regardless of the legitimacy of the lawsuit, your personal assets will remain shielded from the claimant as a result of your business’s LLC classification.

Example 3: When a nearby store owner claims that your theatre company produces too much noise, they file a nuisance lawsuit against your LLC. As an LLC owner, you will not have to personally compensate the claimant regardless of how the claim progresses in 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 Theatre Company

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 theatre company 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

Theatre companies 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.

Business insurance can help protect your theatre company’s assets (e.g., theatrical equipment, etc.) against IP disputes (since these are not covered by limited liability), as well as employee injuries.

Common Situations Business Insurance May Cover for a Theatre Company

Example 1: While on tour, one of your actors causes extensive damage to a host theatre’s dressing room. They are suing for $56,000 to replace and repair the damaged property. General liability insurance would cover related costs and legal representation in court.

Example 2: The cleaning crew uses the wrong cleaner on the floors, causing a patron to fall. The patron is requesting reimbursement for medical bills totaling $24,000. General liability insurance would cover the cost of their medical expenses.

Example 3: You tweet that a theatre you’ve partnered with is difficult to work with. They have named your company in a lawsuit, citing defamation. Your general liability policy would cover your legal fees and any damages awarded in the suit.

Example 4: As part of an expansion project, you are seeking a bank loan. Your general liability policy would help fulfill the bank loan requirement of at least $1 million in liability insurance.

Other Types of Coverage Theatre Companies 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 theatre companies should obtain:

Commercial Property Insurance

Owning and managing a theatre requires investment in a great deal of expensive equipment. To protect these investments, a commercial property policy is recommended. A commercial property insurance policy provides coverage for your owned real estate and its contents should a covered loss occur. Business owners should discuss their business model and financial responsibilities with an insurance agent to properly protect their business investments.

Workers’ Compensation Insurance

Workers’ compensation insurance provides coverage for medical bills and lost wages if an employee is injured or falls ill while on the job. If a lawsuit occurs as a result of this injury, the policy would also cover related legal fees. While the requirements vary from state to state, all business owners are required to carry workers’ compensation insurance if they hire employees.

Commercial Auto Insurance

Whether your theatre group travels regularly or works out of one owned theatre, your team likely spends a great deal of time driving for business purposes. If you or one of your employees is involved in an accident, any loss would be excluded under a personal auto policy. To ensure no gap in coverage, a commercial auto insurance policy is recommended. While each state mandates the minimum coverage limits required, those limits typically leave business owners underinsured. Your insurance agent can assist you in determining what coverage limits best meet your professional and personal needs should a major incident occur.

Inland Marine Insurance

Business-owned tools and equipment taken off-site have limited coverage under a commercial property insurance policy, leaving many owners grossly underinsured. If your theatre travels, an inland marine policy may be necessary to fill those coverage gaps and protect your property when you’re on the road.

Business Interruption insurance

Your business faces a significant loss in revenue if it is shut down after a loss. Business interruption insurance, also known as business income and extra expense insurance, helps protect the business financially if you need to stop operating for a period of time. It would provide coverage for extra expenses, supplement lost income, and help get your theatre set up in a temporary location while the property is being repaired.

Commercial Umbrella Liability Insurance

In this industry, you rely on the patronage of thousands of customers each year. Because this puts you at greater risk for liability claims, your insurance agent may recommend a commercial umbrella insurance policy. Once the underlying limits of your general liability policy have been exhausted, this policy would provide additional coverage, helping secure the theatre’s financial future.

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 Theatre Company Insurance article for more info.

Starting a theatre company can be quite expensive, depending on whether you can find people to donate their time for rehearsals and performances.

Other startup costs include:

Purchasing props and costumes
Getting a lease for a suitable space
Purchasing (or developing) new scripts

When it comes to maintenance, labor, costuming costs, and rent will likely be your largest costs.

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

Your ongoing expenses will include salaries, props for sets and costumes, building rent or loan payments, maintenance, script prices, and other miscellaneous expenses.

Learn more about running a theatre company.

Theatre companies make money through ticket sales, donations, grants from government and other nonprofit organizations, and merchandise sales.

Learn more about starting a theatre company.

Theatre companies offer performances for live audiences, either on the road or in a specific theater. While some companies have a nonprofit structure, others operate as for-profit entities.

The profit margin for your theatre company is going to heavily depend on the overhead costs you enter into, what sort of donations you receive, and how much you are able to charge for tickets.

Learn more about starting a theatre company.