Home
What is the best business structure for a gym? (LLC vs. C-Corp vs. S-Corp)

What is the best business structure for a gym? (LLC vs. C-Corp vs. S-Corp)

Posted by Tyler Spraul, Certified Strength and Conditioning SpecialistĀ® (CSCSĀ®) on July 16, 2021 ā€” Updated on August 24, 2023

For most gyms, the best business structure is an LLC, but deciding the best business structure for gyms is a complicated issue. Check out this guide to learn more about the best business structure for a gym.

Fitness Income Ideas
  • C-corps are complicated to set up and maintain, and they are generally meant for large companies.
  • Before being granted an S-corp status, a business must meet a laundry list of IRS requirements.
  • LLCs are an easy and flexible way for single-owners or partnerships to achieve some of the protections of corporations.

Some aspects of opening a new gym are exciting. Choosing a name, picking out equipment, and designing your own custom-branded fitness app are just a few of the more fun parts of starting a fitness business. But unfortunately, not everything will be so pleasant. In fact, some of it will be downright confusing. Deciding the best business structure for a gym is one such issue.

If you’re the gym’s only owner, it might seem easiest to go ahead as a sole proprietorship, but that means your personal finances will be on the line for all of the business’s successes and failures. Ready to find out if there’s a better way? Then keep reading.

APEC
Exercise.com is simply the best. We were using three or four different apps or softwares to do what we can now do all in one with the Exercise.com platform.
Brandon Stroupe
Founder and President, APEC Sports Performance

The right gym management software can help your new gym run smoothly so you can turn a profit quickly. Book a demo now!

Should my gym be a C-Corp?

A C-corporation is a legal structure that creates separation between the owner’s assets and the business’s assets. Most major corporations are structured as C-corps.

PROS:

  • Because the owners’ assets are not lumped in with the business’s assets, if the business should fail, the owner’s assets are not at risk.
  • A C-corp is not attached to any one person. While shareholders and even owners may change over time, the C-corp still maintains its structure.

CONS:

  • Because the owner’s assets and the business’s assets are separated, each is taxed individually. Therefore, if the owner takes money from the business (in the form of a dividend), it will be taxed first as income for the business and then as income for the owner. In other words, this creates a situation of double taxation.
  • C-corps are complicated to set up and maintain, and they are typically meant for large companies (over 100 people).

Should my gym be an S-Corp?

An S-corporation (sometimes called an S-subchapter or “pass-through entity”) is meant to give smaller companies (fewer than 100 people) the benefits of a corporation without the burden of double taxation. S-corps generally pay no corporate taxes; instead, all profits and losses pass through to the owners and shareholders, who report them on their personal taxes.

PROS:

  • Along with protecting the owner’s assets, a smaller tax bill is the biggest benefit of being an S-corp. This is due to the lack of corporate taxes, but also due to things like deductions on business expenses and limited tax-free distributions to employees who are also shareholders.

CONS:

  • Before being granted an S-corp status, a business must meet a laundry list of IRS requirements. This can be a huge hassle for anyone not used to navigating government paperwork.
  • Even if the business manages to gain S-corp status, the IRS can still terminate that status at any time if the business doesn’t manage its money completely and transparently by the book.

Should my gym be an LLC?

Limited liability companies (LLCs) are a way for single-owners or partnerships to achieve some of the protections of corporations. Requirements vary by state, however, so you will need to investigate the rules for your specific location.

PROS:

  • As the name suggests, owners and shareholders are generally not personally liable for the business’s debts if things should go south.
  • Similar to an S-corp, the LLC’s profits and losses pass through to the owners, who report them on their personal taxes.
  • Unlike corporations, there are far fewer restrictions on who may be considered an owner or shareholder.
  • While there are still paperwork hoops that must be jumped through, LLCs are far easier to set up and maintain than corporations.

CONS:

  • LLCs are attached to a specific member(s). Therefore, the LLC will be terminated in the event of a sale, retirement, or death.
  • LLCs may be subject to self-employment tax, which also results in higher taxes for employees. You may wish to hire an accountant or business attorney to help you make sure your LLC is structured properly to avoid this.

Should a gym be an LLC or S Corp?

The choice of legal structure, such as LLC (Limited Liability Company) or S Corp (S Corporation), for a gym depends on various factors and should be determined after consulting with a qualified attorney or accountant who is familiar with your specific circumstances. Both LLCs and S Corps provide liability protection for gym owners, but they have different tax implications and requirements. An LLC offers flexibility in management and taxation, while an S Corp may provide certain tax advantages for owners who receive salaries and distributions. Ultimately, the decision should consider factors such as the gym’s ownership structure, financial goals, and long-term plans.

What type of business model is a gym?

A gym typically operates under a business model that combines membership fees, personal training services, and additional gym revenue streams such as retail sales, group classes, or specialized programs. The specific gym business model can vary depending on factors such as the gym’s target market, location, size, and services offered. Some gyms may focus primarily on membership fees, while others may generate significant revenue from personal training or specialized fitness programs. The key is to create a sustainable business model that meets the needs of the target audience and provides a range of services to generate revenue.

What type of legal structure is a gym?

Gyms can adopt various legal structures depending on the ownership and management preferences of the business owners. Common legal structures for gyms include Limited Liability Company (LLC), S Corporation (S Corp), C Corporation (C Corp), or Sole Proprietorship. Each legal structure has its own implications in terms of liability protection, taxation, and management requirements. The choice of legal structure should be made after considering factors such as ownership structure, personal liability protection, tax implications, and long-term business goals.

What is the management structure of a gym?

The management structure of a gym can vary depending on the size and complexity of the operation. In smaller gyms, the owner or a small management team may handle day-to-day operations, including membership management, staff supervision, and financial oversight. In larger gyms, there may be a more hierarchical structure with department managers overseeing different areas such as operations, sales and marketing, fitness programming, and administration. The specific management structure can also be influenced by the gym’s ownership model, such as a single owner, partnership, or franchise.

Are gym franchises or independent gyms typically structured differently (LLC, S Corp, etc)?

The legal structure of a gym, whether it is a franchise or an independent gym, can vary. Gym franchises typically have standardized operating procedures and may require franchisees to adopt a specific legal structure, such as an LLC or corporation, to align with the franchise’s requirements. Independent gyms have more flexibility in choosing their legal structure based on the owners’ preferences and circumstances. Whether a gym is a franchise or independent, it’s important to consult with legal and financial professionals to determine the most suitable legal structure for the specific situation.

Who regulates gyms in the US?

Gyms in the US are primarily regulated at the state and local levels. State health departments, licensing boards, and local municipal authorities may have specific regulations and requirements related to gym operations, safety, cleanliness, and compliance with health codes. Additionally, professional fitness organizations such as the International Health, Racquet & Sportsclub Association (IHRSA) and the National Strength and Conditioning Association (NSCA) provide industry guidelines and best practices for gym operators. It’s important for gym owners to be familiar with and comply with the relevant regulations and guidelines to ensure the safety and well-being of their members and employees.

The Bottom Line: The Best Business Structure For Gyms

No matter which way you structure your new gym, there will be pros and cons. However, this is a huge decision that will drastically impact your new fitness business. Unless you have experience in this area, it would be wise to seek professional advice before deciding on the best business structure for your gym.

AMPD Golf Performance
“Working with Exercise.com and their team has been an amazing experience and a dream come true in terms of accomplishing a vision! Their workout technology has helped us effectively engage our community, and I highly recommend Exercise.com to grow your business!”
Andrew Banner
Co-Founder, AMPD Golf Performance

The right gym management software can help turn you into a business pro. Book a demo to get started!

Tyler Spraul is the director of UX and the head trainer for Exercise.com. He has his Bachelor of Science degree in pre-medicine and is an NSCA-Certified Strength and Conditioning SpecialistĀ® (CSCSĀ®). He is a former All-American soccer player and still coaches soccer today. In his free time, he enjoys reading, learning, and living the dad life.
We make fitness businesses happy and successful. We are a next-generation software platform dedicated to making it easy for fitness professionals to manage their entire fitness business in one place.
FollowĀ us:
Company
Start Here
Copyright Ā© 2023 Exercise.com
Made with ā¤ļø at 15310 Amberly Dr, Suite 250, Tampa, FL 33647 & world-wide
Privacy Policy
Terms of Service
CCPA