We get to talk to a lot of gym owners and other businesses in the fitness industry. We consider ourselves particularly lucky when we get to talk with a new business owner. Our primary goal is to help gym owners avoid legal issues. To best to do that, we have to help gym owners set up their businesses properly from the very beginning. It’s much more difficult, and sometimes less effective, if we try to fix problems after the fact. This is particularly true when setting up the corporate structure of the business.
Don’t Lose Everything
We were contacted recently by an owner of an advertising company in the fitness industry. The owner wanted to know what we could do for her business. After a series of questions, we learned that she is currently operating as a sole proprietorship and has yet to set up any legal business entity. When we asked why she has yet to set up her legal business entity, she told us that she is trying to get the business off the ground and make money first. Unfortunately, this is really putting the cart before the horse. Without setting up a legal entity, if one of her customers decides to sue her, all those profits she is focused on now could go right out the door.
Limited Liability Company
In order to avoid losing everything, you have to form a legal entity when you are trying to start a new business. In fact, we believe this should be step #1 after you even get an idea to start a business. The most basic kind of legal entity is a Limited Liability Company, or LLC. Almost everybody is familiar with LLCs and they are relatively simple to set up. Most states have departments dedicated to domestic businesses. These departments often have forms and associated step-by-step processes for you to follow. There are even companies out there, like Gym Lawyers, that will complete this process for you for a modest fee. In the interest of protecting your business and saving you a lot of money in the long run, consider this modest fee and investment in your success.
A Legal Shield
A limited liability company does exactly what the name implies, it limits your legal liability. It shields you and your money. Assume for a moment that you are operating your business without forming an LLC and a disgruntled customer sues you. When this happens, you are personally liable for any negative outcomes to the lawsuit. That means that customer can take money from your personal bank account. Worse yet, that judgment could threaten your family and your home.
However, when your business is operating as a registered LLC, that disgruntled customer must sue the LLC. They are “limited” in their recovery to only the assets of the LLC, not you personally. This protects all of your profits and all of the hard work you will inevitably be putting into growing your business. More importantly, it will protect your family and your home. That, you cannot put a price tag on.