By Jade Chounlamountry, Esq. | Legally reviewed by Aviana Cooper, Esq. | Last reviewed August 17, 2023
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Running a small business in the adult entertainment industry is challenging and comes with special rules. These businesses get a lot of attention because of their sensitive nature. Small business owners must know and follow the rules that control what they can do.
In this article, we'll talk about the important regulations that small adult entertainment business owners should pay attention to.
Adult entertainment businesses (AEBs) provide entertainment and services for adult audiences. Some examples of these types of companies are:
It's important to note that the regulations of AEBs can vary depending on the jurisdiction and local laws. Business owners in the adult entertainment industry must be aware of and follow the rules to operate legally and responsibly.
The most important part of compliance for AEBs is getting the necessary business licenses and permits. Regulations vary from one jurisdiction to another. Most areas have specific licensing requirements for adult-oriented establishments.
Local ordinances often govern whether strip clubs can serve alcohol based on the level of nudity allowed. Clubs that permit full nudity are sometimes allowed to sell alcohol. But usually, clubs that make dancers cover their genitals have the option to serve alcohol, but that is often only for guests 21 and older.
For instance, in Las Vegas, topless clubs can serve alcohol, but fully nude clubs cannot. Business owners must research and apply for the appropriate permits. These permits often involve background checks and may have zoning restrictions.
Zoning laws decide where certain businesses can or cannot set up shop. These laws apply to all kinds of places, like where people live, where factories are, and more. But within these rules, zoning laws for AEBs can be very different and depend a lot on what the people in that area think is right.
For example, in New York City, businesses can operate anywhere in the city if less than 40 percent of their business is sexually explicit. But in Columbia, South Carolina, a business was considered "sexually oriented" if they sold or rented just one movie deemed as sexually explicit. The city changed the law in 2000 because it affected regular stores selling R-rated movies.
Because zoning laws can be restrictive, short-term rentals may be an option. This will allow your startup to determine if the location is profitable through market testing. This could also give you time to gain the necessary approvals for a permanent place while minimizing initial costs and risks.
One of the most essential parts of compliance for AEBs is ensuring that all performers and patrons meet the legal age requirements. AEBs must use strict age verification measures to prevent minors from accessing adult content. Record-keeping is essential to show compliance with these regulations in case of legal inquiries.
AEBs must follow the rules about how they treat their employees. This means making sure the workplace is safe and free from any harassment. This might include:
This way, you can avoid problems and keep your business running smoothly.
Adult businesses with live performances must follow the rules to keep everyone safe and healthy. Inspectors might visit them often to check if they are following these rules. Follow the rules to avoid getting in trouble. You may have to pay fines or even be forced to shut down if you don't. These businesses must ensure they meet safety standards to prevent any problems.
Advertising for AEBs must follow specific rules and regulations about the content and placement of advertisements. Social media is a common place for marketing. Each platform has its own set of guidelines and restrictions.
Demographics can also be vital in digital marketing for adult businesses. Online advertising platforms allow companies to target specific demographics with precision. Using demographic data allows you to show personalized ads for users who like similar content. This helps the website show the right ads to the right people.
Business owners should also ensure their marketing follows the rules in their areas to avoid legal trouble.
Strip clubs and other AEBs may have to follow the rules about making too much noise or being a nuisance. This is especially true if you are near where people live. AEBs must control their noise to keep the neighbors and the local authorities happy and on good terms.
Taxes can be a complex aspect of running an adult entertainment small business. Like any other business, these establishments are subject to various tax obligations. Some key taxes that adult entertainment businesses need to be aware of include:
You can ensure you pay the correct amount of income tax by:
If you have employees, you must withhold payroll taxes and contribute to Social Security and Medicare. Hiring a tax professional with experience in the adult entertainment industry could be helpful. They can help you navigate the intricate tax landscape and avoid potential issues with tax authorities.
Securing small business loans for AEBs is a challenging process due to the nature of the industry. Small Business Administration (SBA) loans are not an option for the adult entertainment industry because of the type of business. Traditional lenders may want to avoid providing lines of credit to AEBs due to perceived risks or social stigma. However, there are alternative financing options available for AEBs.
Some specialized providers or private investors may be more willing to extend loans to adult businesses. They consider factors like cash flow, revenue projections, and growth potential. Merchant cash advances can be a helpful financing option for AEBs when traditional loans may be challenging. Credit cards can also give small business owners the immediate capital they need, but credit cards come at a higher interest rate and can affect your credit score.
Entrepreneurs need to make a detailed business plan to borrow money. This plan should include information about how much money you have, what the market is like, and how you plan to be successful. It's like a roadmap for your new business so lenders can understand what you want to do and decide if they can give you the money.
Being upfront with lenders is essential to increase the likelihood of getting funding. The process may be more demanding than for businesses in conventional industries, but perseverance and a well-prepared loan application can help secure the financial support needed.
Before opening a strip club, video store, or other adult entertainment business, you must understand and follow all applicable laws and regulations. Even a minor oversight can end your venture before opening the doors. For this reason, it's best to consult with a business attorney near you before starting your business.
Contact a qualified business attorney to help you navigate your business's legal and regulatory landscape.
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