What are the ongoing expenses of running a sewing business?

Ongoing expenses for a sewing business include: Supplies — including material, zippers, thread, buttons, and trim Utilities Equipment maintenance Website updates Advertising Learn more about running a sewing business.

Should I Start an LLC for My Sewing Business?

Starting a limited liability company (LLC) for your sewing 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 sewing business, lawsuits can arise from things like missing a contractually agreed-upon deadline, or damaging a customer’s designer dress when trying to repair it.

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

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

Do I Need an LLC for a Sewing 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 Sewing Business

By starting an LLC for your sewing 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.

Like most businesses, sewing businesses will benefit from liability protection because of the potential liability for personal injuries to customers and damage to their property.

Example 1: You accidentally ruin your client's expensive dress while mending it, and she has sued you for the damage. If the court finds you liable and levies a compensation fine against you, liability protection will limit the effects of the damage to only your business assets.

Example 2: You missed a deadline you agreed to with a client, which causes a delay in her fashion show. She files a lawsuit against your business for not holding up your end of the contract and subsequently ruining her event. If the court orders you to compensate her with a significant sum, liability protection will ensure it does not affect your personal finances.

Example 3: While testing the outfit you made for your client, they slip off of the unstable podium and sustain a serious injury. They sue you for not maintaining a safe environment and are demanding you pay their medical expenses. In the event of a guilty verdict, an LLC will ensure you don't pay through your personal finances.

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 Sewing 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 sewing 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

Sewing 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.

Sewing businesses need insurance to enhance financial security and protection against theft or damage of clients' expensive dresses, sewing machines, and general facility protection.

Common Situations Business Insurance May Cover for a Sewing Business

Example 1: A client is bringing over some clothing for alterations when she slips and falls in your entryway. She sustains a broken arm and requires medical care. Your general liability insurance policy will likely cover the cost of her treatment.

Example 2: One of your employees leaves a window open overnight while your business is closed. It rains heavily, and the rain comes through the open window and soaks a stack of designer clothing owned by several of your customers. The clothing is ruined. Your general liability insurance policy will pay for the replacement of damaged customer property.

Example 3: While visiting your place of business for measurements, a client slips and falls off of a stool. She breaks her hip and sues your business. The general liability insurance policy you have will pay for your legal defense, including the cost of settling out of court if necessary.

Other Types of Coverage Sewing 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 sewing businesses should obtain:

Commercial Property Insurance

The sewing equipment and supplies you have in your business are necessary for you to serve your customers and keep income coming in. But if that property is destroyed, in an event such as in a fire, it may be difficult to replace due to its high cost. A commercial property insurance policy would help pay for the replacement of your commercial property.

Product Liability Insurance

The products you sew and then sell to your customers pose a liability that product liability insurance can help protect you from. If the customer determines that your product caused him or her an injury and files a lawsuit, product liability insurance will pay for your legal defense and any settlements that may be required.

Workers’ Compensation Insurance

If you have employees helping you with your sewing business, it is important to have workers’ compensation insurance. It will pay for treating employee injuries due to work-related activities and will help pay for lost wages while they recover from those injuries. Most states require employers to carry workers’ comp.

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.

Read our Sewing Business Insurance article for more info.

Establishing a sewing business requires a low initial investment. You can start from the comfort of your home after you have purchased a sewing machine and other necessary tailoring materials. Generally, a sewing business requires more talent than money.

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

Ongoing expenses for a sewing business include:

Supplies — including material, zippers, thread, buttons, and trim
Utilities
Equipment maintenance
Website updates
Advertising

Learn more about running a sewing business.

A sewing business makes a profit by charging a fee for designing, making, or altering clothing. Time and cost of materials will determine what you can charge.

Learn more about starting a sewing business.

In addition to making and tailoring clothes, sewing businesses also use embroidery and other embellishments to personalize clothing for customers.

The profit of a sewing business will depend in large part on the owner’s experience, what kind of equipment he or she owns, and where the shop is located. Having one or more employees can significantly increase profits.

Learn more about starting a sewing business.