Should I Start an LLC for My Scuba Diving Business?

Starting a limited liability company (LLC) for your scuba diving business can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For a scuba diving business, lawsuits can arise from things like claims that your business failed to disclose the risks associated with scuba diving or provided substandard supervision of a dive.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your scuba diving business seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

Do I Need an LLC for a Scuba Diving Business?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should start an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for a Scuba Diving Business

By starting an LLC for your scuba diving business, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Scuba diving businesses will benefit from liability protection because of the risk of equipment malfunctions, personal injury, and death.

Example 1: A scuba diving company takes a group of customers on a diving trip, and one of the customers is injured while diving as a result of the company's negligence. The customer decides to sue the company for monetary damages. If the owner is found liable, limited liability protection from the LLC structure will protect the owner's personal assets from any compensation awarded in the lawsuit.

Example 2: A scuba diving business is sued by a customer for loss of personal property while on a diving trip. Limited liability helps keep the owner's personal assets out of risk, even if the business is found to be liable for the lost property.

Example 3: A scuba diving business is sued by a supplier for nonpayment of goods or services. Limited liability protection will ensure that the owner's personal assets are not at risk, even if the business is found to be liable for the unpaid debts.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for a Scuba Diving Business

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if a scuba diving business owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

Credibility and Consumer Trust

Scuba diving businesses rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a professional LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Do LLCs Need Insurance?

All businesses need insurance to protect their business assets — even LLCs. This is because the limited liability protection from an LLC protects your personal assets, not your business assets.

Scuba diving businesses need insurance to cover expenses from accidents or injuries during diving excursions, damages to diving equipment or boats, and theft or vandalism of business property. Insurance can also protect against liability claims related to equipment use.

Common Situations Business Insurance May Cover for a Scuba Diving Business

Example 1: Your employee is loading tanks into the truck when he drops one on the foot of a customer. She sues your business for her broken foot. Your general liability insurance policy will pay your legal defense costs, including the cost of hiring an attorney.

Example 2: Another scuba diving business has sued your company for slander. You do not believe that you slandered them, but you need an attorney regardless. The general liability insurance policy you have will pay for your attorney and other legal fees.

Example 3: A customer slips on wet flooring in your restroom and breaks his wrist. He asks that your business pay for his medical bills. Your general liability insurance policy will likely cover his treatment if you file a claim.

Other Types of Coverage Scuba Diving Businesses Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all scuba diving businesses should obtain:

Workers’ Compensation Insurance

The employees at your scuba diving shop need the protection that comes with workers’ compensation coverage. If they get injured performing job-related duties, they can get medical care through the policy. They can also get help covering their lost wages while they are out of work for their injuries.

Commercial Property Insurance

You invested a lot of money to get the right supplies and equipment to run your scuba diving shop. If you were to lose most or all of that property in an unexpected event like a fire, you might have difficulty getting replacements. But if you have a commercial property policy, you can file a claim to get help buying more property.

Commercial Auto Insurance

If you have a vehicle or vehicles that you use for your scuba business, you need commercial auto coverage. A commercial auto policy will pay for repairs if your vehicle gets damaged in an accident. It will also pay for medical care for injured vehicle occupants. And if you or an employee is at fault for the accident, the policy will protect your company from liability.

Commercial Umbrella Insurance

A commercial umbrella policy will kick in if you exceed the limits of your general liability insurance policy—which is possible if you lose a major lawsuit. The policy will start to pay when the general liability insurance policy stops so that you can avoid needing to pay damages out of pocket.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance, workers’ compensation insurance, and commercial property insurance.

Read our Scuba Diving Business Insurance article for more info.

A scuba diving business requires startup costs that could be substantial. These costs may include commercial space, a boat, and equipment for students, as well as property and liability insurance. Equipment costs per student can be up to around $1,000, and the overall startup costs can range from $10,000 to $50,000.

Visit our How to Start a Scuba Diving Business guide to learn more about the costs of starting and maintaining this business.

The ongoing expenses of running a scuba diving business include boat and facility maintenance, equipment replacement costs, fuel, labor, marketing, and insurance.

Learn more about running a scuba diving business.

Scuba diving businesses make money by charging customers for training sessions or guided dives.

Learn more about starting a scuba diving business.

Scuba diving businesses provide guided scuba experiences for individuals or groups. They can specialize in niche activities like technical, cave, wreck, underwater photography, or full-time dive instruction.

Some dive centers report profit margins as high as 55%, but the average profit margin for a scuba diving business needs to be at least 20% to be sustainable.

Learn more about starting a scuba diving business.