Should I Start an LLC for My Furniture Store?

Starting a limited liability company (LLC) for your furniture store 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 furniture store, lawsuits can arise from things like misrepresentation or fraud claims (e.g., as a result of an employee falsely claiming an expensive sofa is real leather, etc.).

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

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

Do I Need an LLC for a Furniture Store?

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 Furniture Store

By starting an LLC for your furniture store, 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.

Furniture stores will benefit from liability protection because of the risk of being sued for personal injuries to customers, trademark infringement due to the store’s name or logo, or slandering another business.

Example 1: A customer is injured while using a faulty piece of furniture purchased from the furniture store. Following this, he proceeds to sue the store for damages. If found guilty, any compensation associated with the lawsuit will only be covered by the business’s assets and not the owner’s personal assets.

Example 2: A customer's furniture is damaged during delivery, leading to a dispute over compensation. Following this, the customer proceeds to sue the store. Liability protection will ensure the owner’s personal assets are not affected by any fees or compensation associated with the lawsuit.

Example 3: A customer complains about the quality of the furniture purchased from the store and requests a refund, leading to a dispute. The customer then proceeds to sue the store as a result of that dispute. Should the court find the business guilty, only the business’s assets will be used in providing compensation.

Example: The child of a customer is playing on a bunk bed in your store when the bed breaks and they fall to the floor. They break their leg, requiring medical attention. The parents of the child sue your business for damages.

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 Furniture Store

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 furniture store 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

Furniture stores 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).

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How to Form an LLC

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

You can hire a dependable 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?

Insurance is crucial for LLCs to protect against potential liabilities and safeguard valuable assets. While limited liability protection can protect the personal assets of LLC owners, insurance is necessary to protect the business's assets and minimize financial losses due to a lawsuit or unforeseen circumstances.

Common Situations Business Insurance May Cover for a Furniture Store

Example 1: One of your employees is bringing in a new load of sofas to the showroom floor when he loses control of the dolly and hits a customer in the back. The customer falls forward, breaking her wrist. She demands that your business pay for her medical treatment. Your general liability insurance will likely cover this expense.

Example 2: The child of a customer is playing with her brother on the bunk beds in your store when she falls to the floor. She breaks her leg, requiring medical attention. The father of the girl sues your business for damages. Your general liability insurance policy would pay for your legal defense, including the cost of a settlement if you settle out of court.

Example 3: The owner of a competing furniture store accuses you of slander and hires an attorney to file a lawsuit. While you disagree that you have slandered his business, you know that you need to hire an attorney to protect your business from the lawsuit. Your general liability insurance will pay for your legal fees when defending yourself against charges of slander, libel, and more. It will also pay for a settlement if one is necessary.

Other Types of Coverage Furniture Stores 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 furniture stores should obtain:

Workers’ Compensation Insurance

There is always the possibility that one of your employees will sustain an injury from a work-related task. If this happens, your workers’ comp policy will pay for medical treatment for those work-related injuries. It will also pay for some of the lost wages the employee suffers if they cannot work while they are recovering. Most states require workers’ comp for employers, so carrying a policy not only protects your employees but it also ensures that you meet the legal requirements of your state.

Commercial Property Insurance

Your furniture inventory is the foundation of your business. If you were to lose a major portion of your inventory, or all of it, you might have a difficult time paying to have it replaced. Unexpected events like fires or major storms can occur and cause extensive damage. With commercial property insurance, you can get money from your insurer to replace inventory and other commercial property that was destroyed by a covered event like a fire.

Commercial Umbrella Insurance

If you are in a situation where your general liability policy limits are exceeded, such as if you lose a lawsuit and are required to pay extensive damages, an umbrella policy would provide additional protection. Without an umbrella policy, your business would be on the hook to pay damages that exceeded those paid by your general liability insurance. But with an umbrella policy, the extra policy would kick in when the general liability insurance limits are reached so you would not have to cover the excess damages out of pocket.

Commercial Auto Insurance

Commercial auto insurance is required for any automobile you use primarily for business. For instance, if you have a delivery vehicle for furniture, you should carry commercial auto. Your policy will cover damages if your vehicle is involved in an accident. If your driver caused the accident, your policy will pay for the damages to the other vehicles and for medical care for the injured. Your state likely requires that you carry commercial auto insurance if you have a vehicle for work.

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 Furniture Store Insurance article for more info.

Opening a furniture store may require a large storefront and warehouse with at least 50,000 square feet, as well as design consultants. The initial investment may reach the millions, depending on the size and complexity of the store and warehouse.

Visit our How to Start a Furniture Store guide to learn more about the costs of starting and maintaining this business.

Paying employees is a major expense of running a furniture store. Other expenses include changing inventory twice a year and storing inventory at a warehouse.

Learn more about running a furniture store.

A furniture store generates income by selling pieces of furniture to as many people as possible.

Learn more about starting a furniture store.

Furniture stores sell a wide variety of furniture, with the price point depending on the market they want to serve. Some sell less expensive pieces for a mass-market audience, while others focus on high-end furniture for wealthier customers.

Some furniture stores sell related items as well. These can include lighting fixtures, appliances, electronics, outdoor furniture, and other products.

A well-run furniture store can average a gross profit margin of about 45%.

Learn more about starting a furniture store.