Choosing The Best Massage Business Structure
One of the first important decisions that you will make for the legal and financial health of you and your new business is deciding what kind of business structure your will set it up as. I have known many therapists over the years that have had tax trouble and financial problems because they didn’t take the time to set things up right. Choosing the best massage business structure is a necessary part of running a successful practice and is not difficult to do. In this article I will cover:
- the types of business structures that you might consider,
- the massage business structures that most therapists use,
- my recommendation for the best business structure.
What Are Your Choices?
Business Structure Types
The business structure that you choose can have legal and tax implications. Below is a list with brief descriptions taken from the SBA website. The Small Business Administration is an excellent resource for business owners and one I highly recommend.
A sole proprietorship is the most basic type of business to establish. You alone own the company and are responsible for its assets and liabilities.
Limited Liability Company (LLC)
An LLC is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership.
A corporation is more complex and generally suggested for larger, established companies with multiple employees.
There are several types of partnerships, which depend on the nature of the arrangement and partner responsibility for the business.
An S-corporation is similar to a C-corporation but you are taxed only on the personal level.
People form cooperatives to meet a collective need or to provide a service that benefits all member-owners.
Tip: Most therapists who own their own business use either the ‘Sole Proprietorship’ or “LLC” as their massage business structure.
What Do Most Massage Therapists Use?
Most massage therapists run their business as a ‘Sole Proprietorship’ or as an ‘LLC’. Some that have larger businesses with employees may choose the ‘Corporation’ option. If you are considering the ‘Corporation’ option for your massage business structure, it’s important to talk with a tax lawyer or accountant for these options require a professional to do it correctly.
Top Two Massage Business Structures Used By Therapists
Sole Proprietorship Benefits
- No paperwork is required for formation.
- Lowest initial cost for formation.
- No required formalities for running the business.
- No extra tax filing requirement, as profits or losses can be reported on the owner’s tax return (pass through taxation).
- Simple structure as all management and control of business is in one person.
Limited Liability Company
- Members (owners) are not personally responsible for business debts and obligations (liability protection).
- No extra tax filing requirement as profits or losses can be reported on the owner’s tax return (pass through taxation).
- High degree of flexibility and simplicity in the ongoing management of the business.
- Flexibility in management control and profit sharing.
Tip: If you choose to run your business as a ‘Sole Proprietorship’ and you use your personal name as the name of your practice, no additional paperwork is required. However, if you use a name for your practice that is not your personal name, you will need to complete a DBA (doing business as) filing with your state.
My Recommendation: LLC
Why Choose An LLC?
To protect you and your family! Even though there are many reasons to choose an LLC, there is no better one than the protection it gives you personally. Hopefully, most of you have or will get malpractice insurance. This is a must-do that most of you know about. While insurance is essential, it doesn’t protect you from every bad thing that can happen. If done right (see below), an LLC can put up a firewall between your business and your personal assets.
The best massage business structure is an LLC
Tip: It is very important to keep your business and personal finances separate. This is true if you want to lower your tax obligation with expense deductions while staying away from IRS audits. Also, to keep the firewall protection of an LLC, it is required that you separate business from personal. In many cases, opening up a business bank account requires that you have a separate business structure, like an LLC.
How To Set Up An LLC
Check out the link below for more information on setting up your LLC:
What’s The Next Step?
It’s not recommended to set up your LLC yourself. There are several important steps that you don’t want to make a mistake with. Using a tax lawyer or accountant is common but can be expensive. I recommend using an online service like Legalzoom. I have used them to set up my LLCs and they walk you through every step along with giving you legal advice if necessary.
Related Article: MyMassageBiz Best Tool: Legalzoom
When setting up a new business, the legal stuff (like choosing the best massage business structure) is the last thing you want to do. It’s more fun doing the creative things like deciding on your name or designing an awesome website. Unfortunately, if this legal stuff is ignored, it can come back to bite you. If you don’t take the time to do the things that will protect you and your business, all the hard work you do might be wasted. I am not saying this to scare you (well, maybe a little); I just know from my own experience how important it is. I have had several businesses over the years and I can honestly say that for most massage therapists, forming an LLC is the best way to go.
I hope you found this article helpful. Please, leave a comment below and let me know what you think. If you want to spread the word, please, share this article on Facebook or Twitter. I wish you success and prosperity.