When we opened our gym in 2013, owning a micro gym was still more of a hobby than a business. Those in the industry often laughed at the idea of following legitimate business principles when trying to run a micro gym. They believed, and in turn would argue, that our businesses were special. However, over the years, it has become evident that the same legitimate legal principles that apply to starting, growing, and maintaining a successful business apply to micro gyms as well. That’s why companies like Two Brain Business exist. They help gym owners, like you, apply business principles known to work.
We exist to make sure that you don’t run into legal problems that could be avoided. All big successful businesses have in-house legal counsel. Think of us as in-house legal counsel for your gym. However, before you can think about growing and maintaining a legitimate business, you have to get it started. Here’s a list of three things you absolutely need in place to start a successful business and protect your business from legal issues.
1. An LLC
You never want to run a business as yourself. This is called a sole proprietorship and will leave you legally exposed forever. If somebody has a problem with you, there won’t be a legal entity to protect you. They only have you. That means you, your family, and all of your assets are legally exposed.
You can avoid this legal exposure by starting a limited liability company, or LLC. It’s in the name after all, “limited liability.” An LLC is a relatively easy thing to create. Most states have forms and fairly standard processes to get it done. There are multiple organizations and law firms out there who can file all of your paperwork for a modest fee.
Once you have your LLC, anybody who wants to bring legal action against your business, has to go after the LLC. They will be limited to the assets of the LLC and not your personal assets. This is the first layer of legal protection.
2. An Operating Agreement
Perhaps the most overlooked piece of starting a business is the operating agreement. Or, if there is more than one owner of the business, a partnership agreement. Think of the operating agreement as the corporate rules and regulations of the business. Also, most states require them by law. The operating agreement will outline the owners, how the owners are paid, the corporate structure, what to do when buying or selling the business, and much much more. Perhaps most importantly, the operating agreement will designate what happens when somebody wants to join or leave the business.
We’ve seen cases where having an operating agreement has saved gym owners thousands of dollars. Alternatively, we’ve seen cases where not having an operating agreement has cost a gym owner much much more. The operating agreement is a legal preventative measure. Getting caught without one will cost you a lot of money.
3. A Good Insurance Policy
This one may seem a little bit more obvious. Everybody knows that you need insurance to protect yourself legally. If something goes wrong in your building, or if a member is injured, you undoubtedly need an insurance policy to protect you. Better to pay a little bit every month, or an annual premium, than have to pay out a $1 million settlement when a mistake is made.
The problem we see is when gym owners pay for inadequate insurance policies. This generally comes up in one of two instances. The most common instance is when the new gym owner doesn’t know or realize there’s a difference in policies. He or she simply calls their homeowners insurance policy or vehicle insurance provider to ask for a business policy. Most large insurance companies are suitable for setting up general business policies, but not policies that are helpful to our unique business.
The second instance where we see this mistake made is when a new gym owner is trying to save a few dollars on the policy premium. Sure, there are less expensive policies out there. However, most of them fall into the issue we just discussed, they won’t actually cover what you need. Alternatively, there are companies like A Guard who specialize in policies for micro gyms. They know and understand your business and provide policies that will cover you at competitive rates.
Invest Now, Save Later
The worst cases we see are cases when gym owners skip these steps and it comes back to haunt them. For example, spending several hundred dollars now to have an attorney draft up an operating agreement can save you thousands in the long run. Look at it as an investment in the long-term success of your business.