Should I Start an LLC for My Yoga Studio?

Starting a limited liability company (LLC) for your yoga studio 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 yoga studio, lawsuits can arise from things like clients being treated unfairly based on their religion, misleading claims about the benefits of its classes, and instructor negligence resulting in client injury.

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

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

Do I Need an LLC for a Yoga Studio?

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 Yoga Studio

By starting an LLC for your yoga studio, 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.

Yoga studios will benefit from liability protection because of risks with the participants, the behavior of the instructors, and property damage where the classes are performed.

Example 1: While taking part in a class run by your yoga studio, a participant is seriously injured after an instructor failed to supervise them while they were attempting to maintain a difficult pose. In this instance, you would be precluded from being held personally responsible for any obligation to compensate this injured party if they decided to sue your business.

Example 2: Your yoga studio has been accused of unfairly treating participants based on their age, denying them access to specific classes. As a result, one client files a discrimination lawsuit against your business. Limited liability prevents you from being held personally responsible to satisfy any damages your business owes.

Example 3: In an advertising campaign run by your yoga studio, numerous false claims are included that mislead customers regarding the benefits of your classes. In the ensuing lawsuit, any obligation to pay damages can only be imposed insofar as the value of the assets belonging to your business.

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 Yoga Studio

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 yoga studio 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

Yoga studios 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.

If a customer were to be injured on your business premises, the assets of your yoga studio would be at risk without insurance to protect them. This is one of a plethora of liabilities that insurance is useful for protecting your yoga studio from.

Common Situations Business Insurance May Cover for a Yoga Studio

Example 1: During a yoga class, a student is injured by a teacher looking to “enhance” the student’s range of motion. The student is seeking compensation for medical bills and lost wages for time out of work. Your general liability policy should cover all expenses and damages.

Example 2: In a teacher-assisted forearm stand, a student loses balance and breaks a mirror on the adjacent wall. Your general liability policy should provide coverage for the student’s injuries and any resulting legal costs

Example 3: A student complains of unlawful use of their picture when a class photo is posted online. A general liability policy can provide protection from the resulting lawsuit.

Other Types of Coverage Yoga Studios 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.

Professional Liability Insurance

Yoga studios have students of varying skill levels attending classes. Unfortunately, students are sometimes injured, citing poor instruction or posture correction. A professional liability policy, also known as errors and omissions insurance, covers negligence claims brought on by human error and/or a misunderstanding.

Workers’ Compensation Insurance

Workers’ compensation insurance is legally required by most states for any company that has full-time or part-time employees. It covers employees if they suffer an injury while on the job. In addition to medical bills, it also offers protection for lost wages, lawsuit costs, and any resulting settlements.

Workers’ compensation is purchased as a standalone policy.

Commercial Property Insurance

Yoga studio business owners who own the real estate they operate out of should consider purchasing commercial property insurance. In the event of a loss, the policy should cover the cost of repairing the building, as well as the replacement of all business property and products.

Commercial property insurance is generally purchased as part of a business owner’s policy (BOP).

Business Interruption Insurance

Most business owners count on their monthly revenue to pay both business and personal expenses. If the business is forced to shut down for an extended period of time, the financial impact could be devastating. Business interruption insurance helps lessen that burden, making up some of the lost revenue.

This type of insurance is typically available as part of a BOP.

Commercial Umbrella Liability Insurance

While a general liability policy offers significant coverage, some lawsuits could result in payouts that exceed primary policy limits. A commercial umbrella liability policy should be considered, as it adds an extra layer of protection.

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, commercial property insurance, and workers’ compensation insurance if you have employees.

Read our Yoga Studio Business Insurance article for more info.

The startup cost of launching your yoga studio is fairly minimal. Leasing will most likely form the largest component, which means startup costs can be further minimized by selecting a cheaper location to rent once classes have been booked.

It is worth noting the other expenses of purchasing mats, insurance, transportation, a computer, and a phone.

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

A yoga studio’s main expenses include the cost of the space, payroll, marketing and advertising, and insurance.

Learn more about running a yoga studio.

Yoga studios make money by charging per class or charging for a membership to the studio. Additionally, the studio could sell products their students need for their classes.

Learn more about starting a yoga studio.

Yoga studios provide yoga classes and instruction to consumers. While yoga studios can offer a variety of yoga techniques, many focus on a specific yoga style

The revenue from a yoga studio can be more than $100,000 annually.

Learn more about starting a yoga studio.