Here’s my experience creating an LLC this month, and some tips about why yoga teachers may want to create one for themselves.
LLC stands for Limited Liability Company. It is an easier structure to create and manage as a small business, as opposed to that of a corporation. An LLC can be created by one person or multiple people. Broadly speaking, the LLC offers a barrier of legal protection between your business dealings and assets and your personal self and assets. Because our society is quite litigious, it’s important to protect your assets – even from yogis. An LLC is also important for separating and paying taxes on your earnings, whether your yoga teaching is on the side or is your primary source of income.
A very useful website that helped me form my LLC is here:
(I encourage you to seek outside advice! I am not a lawyer.)
The process varies by state, but overall, it’s a very simple and straightforward process that cost me just $100 in Georgia (there is an annual renewal fee of about $50). The steps I’ve taken so far are listed below:
- I chose a name for my LLC that was not similar to any other name in Georgia (Angela Hales Yoga, LLC). You can do a name search on the Secretary of State website for your state to see if your desired business name is already taken.
- I submitted my information online to the Secretary of State (following the tutorial of the hyperlinked website, LLC University, above).
- In a few days, I received an approval email granting me my LLC!
- I applied for an EIN (Employer Identification Number) online, which is important to have for tax purposes and also is required to open a business checking account.
- I opened a business checking account with a bank that I had barely ever heard of, Bank of the Ozarks. I chose them over larger banks because their fees were easier to avoid with their most basic business checking account, Small Business Checking. I just needed $100 to open the account (in addition to the EIN and the Articles of Organization from my LLC, which were emailed to me in the approval email). This was a better deal even than Chase, a second choice for me, because Chase requires a $1500 minimum balance in the account at all times. Bank of the Ozarks, however, has monthly fees associated if you open the account to allow multiple user access, opt for paper statements, and if your business requires a high number of transactions per month, you’d want a different account than their Small Business Checking.
- As I am not currently planning on opening a studio, I won’t be discussing permits and licenses for the physical location.
- Down the road, I’ll post about taxes… 😀
You may be asking… do I need to create an LLC if I teach yoga as an employee, rather than an independent contractor?
Yoga teachers are generally classified either as employees (of a studio, gym, etc.) or as independent contractors, again, with a studio or gym, or often through teaching private lessons and workshops. This distinction is ultimately based on the employer – does the employer have, in general, quite a bit of oversight regarding your teaching, schedule, etc.? Then you technically should be classified as their employee. Or is sequencing, teaching, scheduling, and more left mostly up to you? The more latitude you have, the more likely it is that you are (or should be) classified as an independent contractor. Overall, this distinction is a gray area, so it’s important to know your particular classification by speaking with your employer.
While it is not necessary to create an LLC if you are considered an employee, it’s certainly helpful to create that legal protective shield between your business activities (yoga teaching, such as private lessons) and your personal life. It’s also great to be able to get tax deductions as a business for all your travel between studios, purchase of gear (clothes, foam blocks, etc.), and more. It’s crucial that you estimate your tax payments correctly, since you have no employer withholding Social Security or Medicare, and you also owe federal taxes.
For either classification, if you work at a studio, you’ll almost certainly have liability coverage through the studio. However, the LLC is an extra layer of liability protection. (I strongly recommend also purchasing personal liability insurance; mine is through Yoga Alliance but that’s just one option.) If you teach clients privately, the LLC is, in my opinion, essential. The company could be sued and its assets taken away, but your personal assets would be protected.
Disclaimer: The materials available at this website are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.