The majority of trainers and coaches in America are 1099 or independent contractors. Whether or not to LLC as an independent contractor is a commonly asked question in the health and fitness industry. There are facilities/studios in the industry that sign their team members on as employees, meaning they take a risk on the person by paying taxes, health insurance, and other benefits on their behalf. As most of us know the industry is inundated with facilities and studios that take zero risk on their coaches much less put into their professional careers or their financial futures. If you find or currently work for a business that brings you on as a full team member by making you an actual employee, for goodness sakes, stay-they most likely value you as well as the industry. If you do not work for a business or team that believes in the investment then it is critical you understand the benefits of forming an LLC.If you lease space from a studio, meaning you don't wear their logo shirt, attend mandatory meetings, and they aren't risking anything on you i.e paying taxes on your behalf, then yes by all means it is highly recommended that you establish an LLC. Here’s why you do it and how.
There are many benefits of forming a Limited Liability Company in the fitness industry, most revolve around you and protection of your assets. Because of the nature of the industry and how closely we work with people, it is becoming increasingly more important to protect your livelihood. Whether you are teaching classes, coaching athletes, or personal training, there are risks involved in every type of workout. Running your business under the umbrella of an LLC protects you from any debts and/or judgments against you or your business. It also has many tax benefits for you because you are taxed through the LLC as a sole-proprietor even though you have an actual business. This allows for those necessary write-offs like the money you spend on space fees, new gear, conferences, travel costs, meals, etc. You get the picture. It’s going to save you money and protect you long term.
Now that you know why...Here’s how.
First each state is different with regard to set-up costs as well as annual fees. Set-up costs can be done a few ways:
1. CPA-cost ranges from $400-$900. CPA’s cannot provide legal counsel for the LLC.
2. Attorney-cost ranges from $3,000-5,000 or $150-$350 per hour.
3. Online reputable companies like Legalzoom.com, SBA.GOV, or incorporate.com. There are others, please do your research before signing any documents or submitting any payments.
Second, there are annual costs to do business as an LLC ranging from $50.00-$400.00. Your annual fee is typically included in the initial set-up the first year, again this can vary state to state.
To form the actual LLC, here’s what most states will ask for:
● Company Name-Unique and not currently used in your state.
● Filing of Articles of Organization
● Some states require publication which costs $40.00-$2000.00
● Operating Agreements-A description of how your business will run.
● EIN-Employer Identification Number-Used mostly for tax purposes. You will also need this number when making tax free purchases for resale.It can seem a bit overwhelming initially, however it is the golden nugget with regards to getting the most tax benefit and protection for all of your hard work. Please note that this is NOT legal advice and shouldn't be taken as such. These are simply recommendations from someone who has worked in the industry on both sides of the tax game for a long time.