LLC for Yoga Studios

Do you need an LLC for a yoga studio?

If you’re considering opening a yoga studio, you might be wondering whether forming a limited liability company (LLC) is necessary or beneficial for your business. In this guide, we’ll explore the key considerations and advantages of forming an LLC for your yoga studio. 

Forming an LLC for your yoga studio can offer several benefits that provide protection and structure to your business operations. One of the primary advantages of forming an LLC is the limited liability protection it provides. By establishing your yoga studio as an LLC, you can separate your personal assets from the liabilities of your business. The structure also can enhance your professional image. Last but not least, the LLC structure also gives you tax flexibility, letting you pick the structure that works best for you. 

Throughout this guide, we’ll walk you through the process of creating an LLC so you can take advantage of those perks. Whether you’re an experienced yoga instructor looking to open your own studio or considering teaching yoga for the first time, forming an LLC can be a crucial step toward building a successful and sustainable yoga business.

Do you need an LLC to teach yoga?

If you’re just planning to teach yoga without a physical studio, you might be wondering if forming an LLC is even necessary for your business. While you might not have the same physical space as a studio, the benefits of forming an LLC still apply. You’ll still get limited liability protection, enhanced credibility, and the flexibility to choose the tax structure that works best for you. Those liability and tax advantages wouldn’t be provided to you if you operated as a sole proprietorship or partnership.

Why Starting an LLC for a Yoga Studio is Important

Personal Asset Protection

The top reason to form an LLC for a yoga studio is to gain access to the personal asset protection provided by this business structure. Whether you operate your business as a solo yoga teacher or if you’ve partnered with other teachers to create a large studio with a wide variety of classes, you need the limited liability protections that an LLC can provide.

As an example, let’s say that a customer slips on a wet spot on your floor, falls over, and injures themselves. If you operate your studio as a sole proprietorship or general partnership, your personal assets — like your house, car, or personal bank accounts — would be at risk if that customer decides to sue your business.

On the other hand, if you form an LLC for your yoga studio, and you operate and maintain that LLC in a compliant fashion, the scope of your customer’s lawsuit will be limited to your business assets. In other words, your personal assets will be protected from your business debts thanks to the structure you’ve chosen.

Taxation

Another important benefit of an LLC is taxation. The LLC actually provides its owners with a selection of options regarding how they want the business to be taxed, which can potentially save you a considerable amount of money compared to simply operating as an informal business entity.

Sole Proprietorship/General Partnership

Your yoga LLC can be taxed as a sole proprietorship (for single-member LLCs) or general partnership (for multi-member LLCs), which is the default option. With this tax structure, your studio itself doesn’t pay taxes, but rather the profits are passed through the business entity and your owners pay taxes on that money when they file their own personal taxes.

C Corporation

You can also choose for your yoga studio to be taxed as a C corporation, although this option isn’t very popular because it subjects your business to what’s known as double taxation — meaning that your profits are taxed first on the corporate level and again on the personal level when they’re distributed to your owners.

S Corporation

The other option is S corporation taxation. There are quite a few limitations to electing S corp taxation, but most U.S.-based yoga studio businesses have no trouble meeting these requirements — your business cannot have more than 100 owners, they all must be either residents or citizens of the United States, and so on.

S corp taxation can help your studio save money by reducing your self-employment tax burden. Instead of paying self-employment taxes (a 15.3% tax that includes the employer and employee portions of Medicare and Social Security) on all of your business income, you can pay yourself and your co-owners a reasonable salary for your roles and only pay self-employment tax on that portion of your income, while you can reinvest the rest of it into your business without paying this tax.

Compared to operating as a sole proprietor or general partner, the S corp taxation model could potentially save you quite a bit of cash that you can use to buy new equipment and make other improvements to your studio, rather than writing a big check to Uncle Sam.

Enhanced Credibility and Name Uniqueness

Finally, an LLC structure can enhance the credibility of your yoga studio business venture. Informal business entities don’t have exclusive assumed business names and typically operate under the personal name(s) of their owner(s). For instance, if your name is Johnny Smith and you operate a yoga studio, your company’s name is also “Johnny Smith,” which obviously isn’t a great name for a studio.

In this scenario, you could register a DBA (doing business as) name to give your business the ability to operate under an assumed business name, but DBAs have no exclusivity regarding their naming rights in many states. This means that if another studio wants to use your DBA name as their own, they’re not only allowed to do so, but they can actually register a formal business entity with that name, preventing you from continuing to use your own assumed name.

With an LLC, you not only have the rights to exclusive use of a business name, but you will also have either the phrase “limited liability company” or the letters “LLC” in that business name. This provides your business with a jolt of respectability because customers respect the professionalism displayed by an LLC. Also, they typically feel more comfortable writing checks to a business entity rather than to an individual.

What is an LLC?

First off, let’s quickly outline what an LLC is. LLCs are formal legal entities that are typically taxed similarly to sole proprietorships and general partnerships, in that the owners include any company profits or losses into their personal returns — the LLC itself does not owe income taxes.

An LLC may also elect to be taxed like a corporation, although this is not a very common option.

There are similarities to corporations too, especially when it comes to financial responsibilities. In an LLC, the owners or members are not usually personally accountable for the financial status of the business. This means that if someone sues your LLC, your personal assets are not at risk. For more information see our LLC definition page.

How to Start a Yoga Studio LLC

The formation process for LLCs varies depending on which state you’re forming one in, but in general, the process has some universal steps that need to be taken no matter what state your business is located in. If you want a thorough overview of all the steps required to form an LLC, check out our complete guide on the topic. The basic steps in the LLC formation process in any state are as follows:

1. Choose an LLC name

Coming up with the perfect name for your new LLC is an important step. You’ll need to choose a name that represents your company and describes what you do, and you’ll also have to make sure it isn’t already in use by checking your state’s business database.

2. Designate a registered agent

Your LLC’s registered agent (which can be an individual or a professional service) is responsible for receiving important document deliveries from the state — like service of process or annual report reminders — and forwarding them to you. The registered agent ensures that the state always has a reliable point of contact for your business.

3. File your formation documents with the state

The form used to create an LLC is usually called the Articles of Organization, although the name can vary (some states call it the Certificate of Formation or something similar). You’ll need to provide the state with some basic information about your business and its owners. In exchange, the state will formally create your LLC.

4. Acquire an EIN

The Employer Identification Number (EIN) is a federal tax ID number that essentially functions as a Social Security number for a business. The EIN allows your business to hire employees, pay taxes, apply for bank loans, and more. You can obtain an EIN from the Internal Revenue Service free of charge.

5. Create an LLC operating agreement

Most states don’t require operating agreements, but every LLC should have one regardless. This is an internal document that outlines several key operational aspects of your LLC. The value of the operating agreement is how it can help prevent ownership disputes down the line by clearly explaining how the LLC will be run.

6. File a BOI report

Beginning in 2024, LLCs are required to file a beneficial ownership report, or BOI report. This report is filed with the Financial Crimes Enforcement Network (FinCEN). When you file, you’ll be asked to provide information about your beneficial owners, or the people who gain substantial economic benefit from the LLC, exert control over it, or hold 25% or more of its ownership interest. You can file this report for free online. 

7. Create a financial infrastructure

You will need a business bank account for your LLC, and you’ll probably want a business credit card for work-related expenses as well; keeping a separate bank account helps ensure that you don’t accidentally mingle personal and business finances. It’s also a good idea to use accounting software like QuickBooks or even hire an accountant to handle your bookkeeping for you.

8. Handle taxes, licenses, and permits

Depending on your state, you may need a general business license to operate your LLC in compliance with state requirements. Your yoga teachers will need to be certified, but overall, there are fewer licensing requirements for yoga classes than there are for some other fitness businesses, like a traditional gym. Still, don’t forget to check with your state to see if there are franchise or privilege taxes assessed on LLCs, and also see if your municipal and/or county government entities have any further licensing requirements.

9. Understand maintenance requirements (annual reports, franchise taxes, etc.)

Again, these requirements can vary by state, but most states require some sort of regular report to ensure that your LLC’s info is up to date in the state’s business database. Some states require reports each year, while others only require them biennially or not at all. No matter what your state requires, you’ll need to stay on top of it to keep your LLC in good standing.

Additional Resources for Starting a Yoga Studio

1. YouAligned

YouAligned, formerly YogiApproved, has plenty of resources for yoga practitioners and teachers alike. For studio owners, their “Best Online Resources for Yoga Teachers” page has you covered. This page has all sorts of great tools for yoga studios, with information about insurance, teacher training, yoga sequencing, and much more.

2. Yoga Alliance

Yoga Alliance “provides meaningful and affordable educational opportunities to equip our members with the tools and resources needed to improve their business practices, network with peers,” and much more. One thing we appreciate about Yoga Alliance is how they offer information about so many different parts of the yoga teaching experience.

3. YogaJournal Tools for Teachers

YogaJournal’s “tools for teachers” section is just one of many helpful areas of their website, as this resource provides information to help yoga teachers of any experience level enhance and streamline their teaching skills. YogaJournal also offers newsletters and retreats, and they even have their own tool that helps you sign up for yoga insurance.

4. The Yoga Teacher Resource

The Yoga Teacher Resource is centered around a regular newsletter, which also includes Yoga Teacher Resource’s 100 yoga class theme ideas. Yoga Teacher Resource also has information on how to be a better teacher, how to plan your classes, and how to operate the business side of your yoga studio.

5. The Yoga Nomads

The Yoga Nomads say that their mission is to “help yoga teachers transform their passion into a sustainable business,” especially if you want to travel the world while teaching. To accomplish this goal, they have resources to help you find your ideal customers, pay your bills, and “encourage personal growth.”