Generally speaking, studio owners are artistic geniuses. You people know your stuff when it comes to quality training, correct technique, effective teaching styles, healthy parent relations, current movement trends, best business practices and so much more.

But when it comes to the minute legal details that come with opening and running a studio, there tend to be a few important tips and tricks that many aren't aware of.

To keep you as informed and prepared as possible, we spoke to lawyer and dance enthusiast Sean Monson. He works at a firm in Salt Lake City, Parsons Behle and Latimer, and is the husband of renowned studio owner Jana Monson, of Creative Arts Academy in Bountiful, Utah.

Whether you're a longtime studio owner or just getting started, check out these best practices to make sure you stay on top of potential legal headaches in the future.


1. Legal Entities

When you start a dance studio, you can choose to do it as a sole proprietorship or as a corporate entity. Feeling a little confused about what that means? Don't worry—Monson gives his take.

"A sole proprietorship means you don't form a legal entity at all," he says. "So, if I were to start my own dance studio, I would get paid personally, and then pay my employees out of my own pocket. The downside to this is, if a student gets hurt, I am personally liable, and my personal assets can be sued by someone to satisfy a judgment. If one of your teachers injures or harms a child, and you don't have a corporate entity, they can collect on your bank accounts, houses or cars. Everything is on the line."

That doesn't sound great, right? Yeah, Monson doesn't think so either. So, he recommends you create a corporate entity. There are three main types of corporate entities: a C Corp, an S Corp and an LLC. Companies like Apple or Microsoft are C corps, and according to Monson, because of complexities, formalities and taxes, there's really no reason dance studios need to be. So, let's just go ahead and cross that one off our list of options.

"A dance studio should want to be an S Corp or an LLC," he says. "There are advantages and disadvantages to both. An S Corp has some formalities and administrative headaches to it, but it's single taxation. Meaning, when money comes in, it's only taxed once. LLCs don't have a lot of formality to them, but the downside is you have to pay self-employment tax. For example, if your dance studio makes $100,000 you will be taxed on that as income tax, and then all of that will also be subject to self-employment tax. I recommend that if people have an LLC, they do an S-election. If you do this, you can be taxed as though you're an S Corp, meaning you pay yourself a salary, and only pay self-employment taxes on that salary rather than the full $100,000. Bottom line and most importantly, if you register as one of those, if someone sues you, your investment in the company will be at stake, but none of your personal assets."


2. Owning Your Own Studio Space

If you own or are planning to buy the space your studio is in, make sure you have the real estate in a separate legal entity than your dance studio.

"I cannot underscore this enough: For liability protection, studio owners have to buy the building with a different legal entity than the dance studio entity," Monson says. "If someone gets hurt or a teacher is inappropriate, and the dance studio owns the building, someone who sues can collect on the judgement through the building. If the dance studio doesn't own the building, there is nothing to collect against."

Monson recommends you set up your dance studio as an LLC or an S Corp, then set up a separate company to buy the real estate and have the studio rent from that other company.

Confused? Let's clarify: You own both businesses, so when the studio pays rent to the company that owns the building, it's actually just you paying money to yourself each month. This way if, say, a teacher sues for wrongful termination, they can't collect against the building.


3. Independent Contractors Versus W2 Employees

A lot of dance studios want to pay their teachers as 1099 contractors in order to save on taxes. If they pay teachers as 1099 contractors, the teacher has to pay all of their social security and medicare taxes on their own, and the employer isn't responsible for them. If they pay their teachers as W2 employees, the studio pays for half of their social security and Medicare taxes, while the employee pays the other half.

"The problem with that is there are limitations and guidelines about when you can pay someone as a 1099 contractor and when you can pay someones as a W2 employee," Monson says. "If you have regular teachers at your dance studio, the IRS will likely disagree with you and see them as W2 employees. If that's the case, you will have to pay penalties and back taxes for everyone you misclassified. It can be a huge financial headache. I know of three or four studios who were audited by the IRS and had to shut down or sell their business because of this."


4. Noncompete, Nonsolicitation and Confidentiality Agreements

This subject can get a little touchy—and rightly so. Check out Monson's recommendations and see if they might be a good fit for your studio.

"Have a confidentiality agreement in which employees agree not to share things like marketing strategies, business plans, how much you pay people, client contact information or other confidential information that could be used to your detriment," Monson says. "Include a nonsolicitation agreement in that same document. This agreement means that, if they leave your studio for whatever reason, they won't solicit your clients or other employees to leave with them and go to another studio. A noncompete agreement can be included in this as well, but you will have a hard time convincing a court to enforce it. At our studio, we don't stop people from starting a competing business, but we try to stop them from contacting our clients. We pay them to establish a relationship with our students, so it's only fair that we have an amount of time to protect our relationship with them."

Monson recommends you set up an agreement that says they can't contact the customers of your studio for one to two years after they leave your business.

"I know it's money to talk to an attorney, but if you do it up front and make sure you have this stuff covered, you will save yourself from heartache and headaches in the future."

Dance Teachers Trending
Photo by Jerome Capasso, courtesy of Man in Motion

Finding a male dance instructor who isn't booked solid can be a challenge, which is why a New York City dance educator was inspired to start a network of male dance professionals in 2012. Since then, he's tripled his roster of teachers and is actively hiring.

Keep reading... Show less
Dance Teachers Trending
Photo by Todd Rosenberg, courtesy of HSDC

This fall Hubbard Street Dance Chicago initiates an innovative choreographic-study project to pair local Chicago teens with company member Rena Butler, who in 2018 was named the Hubbard Street Choreographic Fellow. The Dance Lab Choreographic Fellowship is the vision of Kathryn Humphreys, director of HSDC's education, youth and community programs. "I am really excited to see young people realize possibilities, and realize what they are capable of," she says. "I think that high school is such an interesting, transformative time. They are right on the edge of figuring themselves out."

Keep reading... Show less
Getty Images

Q: What policies do you put in place to encourage parents of competition dancers to pay their bills in a timely manner?

Keep reading... Show less
Dance Teacher Tips
Photo courtesy of Kim Black

For some children, the first day of dance is a magic time filled with make-believe, music, smiles and movement. For others, all the excitement can be a bit intimidating, resulting in tears and hesitation. This is perfectly natural, and after 32 years of experience, I've got a pretty good system for getting those timid tiny dancers to open up. It usually takes a few classes before some students are completely comfortable. But before you know it, those hesitant students will begin enjoying the magic of creative movement and dance.

Keep reading... Show less
Just for fun
Photo via @igor.pastor on Instagram

Listen up, dance teachers! October 7 is National Frappe Day (the drink), but as dance enthusiasts, we obviously like to celebrate a little differently. We've compiled four fun frappé combinations on Instagram for your perusal!

You're welcome! Now, you can thank us by sharing some of your own frappé favs on social media with the hashtag #nationalfrappeday.

We can't wait to see what you come up with!

Keep reading... Show less
Site Network
Original photos: Getty Images

We've been dying to hear more about "On Pointe," a docuseries following students at the School of American Ballet, since we first got wind of the project this spring. Now—finally!—we know where this can't-miss show is going to live: It was just announced that Disney+, the new streaming service set to launch November 12, has ordered the series.

Keep reading... Show less
Dance Teacher Tips
Photo by Tony Nguyen, courtesy of Jill Randall

Recently I got to reflect on my 22-year-old self and the first modern technique classes I subbed for at Shawl-Anderson Dance Center in Berkeley, California. (Thank you to Dana Lawton for giving me the chance and opportunity to dive in.)

Today I wanted to share 10 ideas to consider as you embark upon subbing and teaching modern technique classes for the first time. These ideas can be helpful with adult classes and youth classes alike.

As I like to say, "Teaching takes teaching." I mean, teaching takes practice, trial and error and more practice. I myself am in my 23rd year of teaching now and am still learning and growing each and every class.

Keep reading... Show less
Dance Teacher Tips
Misti Ridge teaches class at Center Stage Performing Arts Studio. Photo by Arlyn Lawrence , courtesy of Ridge

The dance teachers who work with kids ages 5–7 have earned themselves a special place in dance heaven. They give artists the foundation for their future with impossibly high energy and even higher voices. Enthusiasm is their game, and talent is their aim! Well, that, self-esteem, a love for dance, discipline and so much more!

These days, teachers often go a step beyond giving tiny dancers technical and performative bases and make them strong enough to actually compete at a national level—we're talking double-pirouettes-by-the-time-they're-5-years-old type of competitive.

We caught up with one such teacher, Misti Ridge from Center Stage Performing Arts Studio, The Dance Awards 2019 and 2012 Studio of The Year, to get the inside scoop on how she does it. The main takeaway? Don't underestimate your baby competition dancers—those 5- to 7-year-olds can work magic.

Keep reading... Show less
Site Network
Patrick Randak, Courtesy In The Lights PR

The ability to communicate clearly is something I've been consumed with for as long as I can remember. I was born in the Bronx and always loved city living. But when I was 9, a family crisis forced my mom to send me to Puerto Rico to live with my grandparents. I only knew one Spanish word: "hola." I remember the frustration and loneliness of having so many thoughts and feelings and not being able to express them.

Keep reading... Show less
Studio Success with Just for Kix
Courtesy Just for Kix

As a teacher or studio owner, customer service is a major part of the job. It's easy to dread the difficult sides of it, like being questioned or criticized by an unhappy parent. "In the early years, parent issues could have been the one thing that got me to give up teaching," says Cindy Clough, executive director of Just For Kix and a teacher and studio owner with over 43 years of experience. "Hang in there—it does get easier."

We asked Clough her top tips for dealing with difficult parents:

Keep reading... Show less
Dancer Health
Getty Images

It's the middle of the semester and two dancers are sitting out of class, you're worried about one student's mental health and another has developed an eating disorder. Sound familiar? College can be a tumultuous time. To help address the additional demands of being a dance major, some schools have found strategies for enhancing wellness and integrating health services into their departments.

Keep reading... Show less

mailbox

Get DanceTeacher in your inbox