After coming up with the idea, the next step in starting your business should be to write a dance studio business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.

Related: How to write a business plan

A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

When deciding on which business entity is best for a dance studio, it normally comes down to the sole proprietorship and Limited Liability Company.

A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
 
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.

That leaves the sole proprietorship and LLC.

The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.

Related: Guide to forming your LLC
 

Finding the perfect name for a business can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.

Related: Tips and ideas for naming a dance studio

While most dance studios don’t necessarily require a prime, high-traffic location, it is usually important to be easily accessible to your customers, even though some customers will travel long distances if your program is excellent.

Rental costs for studio space will vary depending on the facility that the business rents. An already outfitted dance studio will usually cost more to rent than a space that needs to be renovated, but the business will save on renovation costs and start operating as soon as the rental agreement begins.

Consider how much space is needed and how that space is used. Most studios will need a lobby/waiting room, classrooms, office, bathrooms, storage, and plenty of parking. Studios offering multiple types of dance and planning to run multiple classes at once will need more space, which can also increase rental costs.

Related: Choosing a business location

There are no specific licenses for dance studios; however, there are general business registrations at the local, state, and federal level that a dance studio might need, such as a business license, sales tax permit to sell branded apparel and outfits for performances, Employer Identification Number for payroll taxes, and an Occupancy Permit to operate out of a commercial location among others.

To improve a dance studio’s credibility with customers and to better attract employees, accreditation may be useful. Popular accrediting bodies include the National Association of Schools of Dance, National Office for Arts Accreditation, etc.

Related: Common business licenses, permits, and registrations by state

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a dance studio is another. The cost to start a dance studio is relatively small; however, funding can be difficult as a majority of expenses are for renovations to the building. In order to get a small business loan, the borrower(s) will need to have good credit and be able to invest 15-25% of personal savings towards the total start-up costs.

Related: Finding the money to start a business

Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
 
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.

Marketing your studio’s grand opening is important, but thought will be needed for ongoing marketing campaigns. Not only does marketing bring in new students, but as studios start up new classes and programs, they need to market those to build enrollment, too. Marketing techniques can involve everything from putting dance videos on social media to print advertising and even radio advertising.

Additionally, if there is a health or fitness club that isn’t offering dance classes, this could be an opportunity to work together and cross-market each facility’s classes.

Related: Low-cost ideas to market a new business

There are several types of insurance to consider when starting a dance studio. A few of these include:
– General liability insurance protects the business if anyone, like a dancer or a family member, is injured while on the property. This type of policy can cover expenses like legal fees or medical bills.
– Commercial property insurance protects the studio if its equipment or the studio itself is ever damaged in an event like a fire.
– Worker’s compensation insurance helps to cover expenses like medical bills or lost wages if an employee is ever hurt while on the job.

The cost to insure a dance studio will vary depending on factors like where the business is located, the studio building’s value, and the number of employees. To get the best idea of insurance costs, request quotes from multiple companies. When comparing those quotes, pay attention to variables like coverage limits and exclusions, premiums, and deductibles.

Related: What types of insurance does a fitness center need?

A studio owner may teach all of the studio’s classes initially, but as the studio grows, it may be time to hire additional dance instructors. According to PayScale, dance instructors make an average of $23.51 per hour, though hourly rates range from as little as $11.89 to as much as $39.21, depending on an instructor’s experience and location.

In addition to paying for employee salaries, a studio also needs to budget for other types of expenses that come with hiring employees. Paid time off, worker’s comp insurance, and even retirement and health insurance contributions are some of those costs.

Related: Hiring your first employee

Setting up an accounting system for your dance studio is critical to the long-term success of your business.

Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up the accounting for your business