LLC or S Corp for Personal Trainer or Wellness Professional? Pros and Cons

The way you structure your business as a personal trainer or other wellness professional could be one of the most important decisions you make.

Like many in your position, you may have narrowed your options down to an S Corporation or an LLC. However, you can’t just make this decision blindly — each of these have their pros and cons.

We’re going to explore those pros and cons in this article.

Still struggling to decide between an LLC and an S Corp for your personal training or wellness business? Reach out to the health and wellness attorneys at Wellness Law.

In the meantime, here are some of the advantages and disadvantages of choosing LLCs and S Corps for personal trainers.

What Is an LLC?

A limited liability company (LLC) is designed to combine the tax benefits of partnerships and limited liability of corporations.

LLCs can be multi-member or single-member businesses but are different from sole proprietorships. They operate as an entity separate from their owners, which could help protect you from legal liability in the event that your personal training business is ever sued.

These are relatively new types of business structures that are designed for small and medium-size businesses. Generally, LLCs are the preferred method for personal trainers, as they can register as a single-member LLC.

To form an LLC, you will need to submit articles of organization, other paperwork and a fee to a government office (usually the Secretary of State, but the precise office varies by state).

Pros of an LLC for a Personal Trainer

There are many advantages to choosing an LLC as a personal trainer:

  • The ability to change your tax structure
  • They are easy to establish
  • They can be managed by members
  • They reduce personal liability
  • There is no limit on the number of members your LLC can have
  • Both US and non-US residents can be members of the LLC
  • Your business will likely get pass-through taxation

Cons of an LLC for a Personal Trainer

There are also several disadvantages to choosing an LLC as a personal trainer. Some of the most notable cons of a personal trainer LLC include the following:

  • They can be difficult to raise money for
  • They require additional tax forms
  • You need to pay self-employment taxes
  • You are not allowed to issue stock

What Is an S Corp?

An S Corp, also known as an S corporation, is a subchapter of a corporation with special tax classifications that allow you to protect your business from double taxation.. If you are the owner of an S Corp, you can receive a paycheck from your business and distributions.

Already a C Corp? Don’t worry You can register as a C Corp and then elect S Corp status by using Form 2553 with the Internal Revenue Service (IRS).

Incorporating your business may be a good option if you are hoping to limit your personal liability. This way, you are separating your personal assets from your liabilities. However, most LLC structures offer similar liability-related benefits.

S Corporations are taxed similarly to partnerships in order to avoid double taxation. You will need to file articles of incorporation with a government office (likely the Secretary of State, depending on your location) to form an S Corp.

Pros of an S Corp for a Personal Trainer or Wellness Professional

Some of the biggest advantages of choosing an S Corp for your personal training business include the following:

  • Your profits are taxed at individual shareholder rates
  • You get to avoid double taxation
  • Liability is limited for management and shareholders
  • You likely get pass-through taxation
  • You can receive your salary and dividends from your business

Cons of an S Corp for a Personal Trainer or Wellness Professional

Some of the biggest cons of choosing an S Corp for your personal training business include the following:

  • You must remain in compliance with complex tax laws
  • There are a restricted number of shareholders- you cannot have more than 100 shareholders
  • There are additional requirements for business formation
  • There may be ongoing franchise tax fees
  • You are limited to just one class of stock

How to Choose Your Personal Training or Wellness Business Structure

Working with a legal professional may be the best way to determine which business structure is best suited for your personal training or wellness business. It is important to get the financial and legal advice you need or you could be at risk for severe tax and legal implications with the IRS.

When to Go With an LLC

For many personal training and wellness businesses, an LLC can offer the protection the personal trainers want and the tax flexibility they need to succeed.

When to Go With an S Corp

However, suppose you are going to own a property where your business is operated. In that case, it may be a better option to choose an S Corp. This is typically due to the risk of tax implications that could arise with the sale of a property.

These complex accounting matters should always be discussed with your CPA as well to ensure your business remains in compliance with local, state, and federal regulations.

Ultimately, though, the decision is unique to your situation. Many other details and factors may influence which business structure is best for your personal trainer business.

With so many different factors to consider, working with a health and wellness business attorney can help set your personal training business up for success from the start.

Which Option Is a Better Fit for You? Call Today to Find Out

Deciding whether an S Corp or LLC is the right option can be difficult, to say the least. While you may see the pros and cons of each, making the right decision about how to structure your business is critical. And it’s hard to tell which option is the best fit for your unique situation.

But there’s a simple solution:

Find out whether an LLC or S Corp is a better fit for your personal training business when you reach out to the Center for Health and Wellness Law. Our trusted and experienced attorneys are here to help you set your business up for success. Call our office at (608) 579-1267 or fill out our quick contact form to schedule your free initial consultation today.