I’m starting my own yoga business and trying to get a good understanding of a few legal questions before launching. It’s not a traditional yoga studio or anything, it’s going to be primarily online (YouTube, email newsletter to subscribers, subscription sites that host yoga and fitness videos from various teachers) with in-person workshops/retreats (hosted around the world.) I’m currently based out of Colorado (just in case that makes a difference for taxes.)
I want it setup so that money from my business comes to me personally since business expenses will be coming from me personally, and I set aside money for taxes which I then pay later when filing taxes. It will be just me, and I won’t need a salary since I’ll earn whatever is left after setting aside taxes and covering business expenses.
I think that means I need a sole proprietorship, but I also know that small businesses can start as S-Corp or LLC. The main benefit I understand between the others and LLC is that LLC protects your personal assets in the event that you’re sued (not that I think that will ever happen) however I’m covered under yoga insurance. Does yoga insurance works in lieu of being LLC?
You should know that an S corporation is a tax status and not a form of entity. Each of an LLC and a corporation can elect S corp. status (assuming they meet the requirements for S corp. status). Both a corporation and an LLC protect your personal assets from business claims, assuming the entity is properly organized and operated.
Insurance also protects against claims, but only up to the limits of the policy and subject to deductibles and exclusions from coverage. The ideal structure (assuming you can afford it) is to operate the business in a corporation or LLC (to protect your personal assets from business claimants) and obtain insurance to protect the assets of your business entity. If your finances do not permit that structure, you should do a financial analysis of the relative costs of insurance versus the cost of forming and operating a business entity. A Business Attorney and CPA would be invaluable in making that decision.
The foregoing discussion does not establish an attorney-client relationship, is qualified by the limited facts presented above, and should not be relied upon as legal advice. To obtain definitive legal advice upon which one can rely necessitates retaining an attorney who is qualified in this particular area of the law.
You probably will want a single member LLC that is disregarded for tax purposes. This means you would file a Schedule C the same as if you were a sole proprietor. Please retain a good tax and business attorney to help select the right State and form of entity.
Good luck in your new business!
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