Should I Start an LLC for My Skate Shop?

Starting a limited liability company (LLC) for your skate shop 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 skate shop, lawsuits can arise from things like a customer being sold a defective skateboard that later causes them injury or allegations that your shop is selling counterfeit products.

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

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

Do I Need an LLC for a Skate Shop?

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 Skate Shop

By starting an LLC for your skate shop, 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.

Skate shops will benefit from liability protection because of the risk associated with guests and other involved parties (ie. delivery personnel) visiting your shop, product liability, and other general business risks.

Example 1: A client just finished patronizing your business, and he walks to the door. As he approaches, another customer simultaneously pushes the door, it hits his head, and the client is injured. If he sues for damages, your business may be liable to pay compensation, but your personal assets will not be affected.

Example 2: A client orders skateboards in bulk for his students. Weeks later, he returned them and complained that many of the stake boards broke quickly. He insists you must make a partial refund for the loss. If he sues you, your business may be liable for damages, but the LCC will spare your personal assets from the lawsuit.

Example 3: Your employee boards a cab to deliver goods to a client. He arrives and tries to bring the goods out of the vehicle, but a skateboard cracks the glass. The cab driver initiates a lawsuit against your business. The case may affect your business, but your personal assets will be safe.

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 Skate Shop

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 skate shop 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

Skate shops 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 limited liability protection from being an LLC protects your personal assets, not your business assets.

Skate shops need Insurance to cover damage to skate repair equipment, theft of goods, and employees' and clients' lawsuits.

Common Situations Business Insurance May Cover for a Skate Shop

Example 1: As a customer tests a skateboard deck, the wheels catch on a cord running in front of your cashier stand. His fall shatters the glass countertop and causes serious injuries. General liability insurance would pay for the customer’s medical costs and your legal fees in the event of a lawsuit.

Example 2: During an in-store customer appreciation event, someone spills a drink causing another customer to slip and break an arm. Your general liability coverage would pay for the customer’s medical bills and any other costs associated with a lawsuit.

Example 3: When a shipment arrives early, no one is available to unload the truck so the driver offers to help in order to keep his other deliveries on schedule. As he enters the building, the loading dock door malfunctions and hits the delivery truck door as well as the driver’s head. Your general liability insurance would cover the driver’s medical bills as well as repair costs for the delivery truck.

Other Types of Coverage Skate Shops 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 skate shops should obtain:

Commercial Property Insurance

You’ve made major investments in the latest equipment, furniture and a broad inventory to ensure your skate shop stands out. If you own the building in which you operate, you’re responsible for all business-related property housed there in the event of a fire or other natural disaster. Commercial property insurance would cover the cost of repairing or replacing your business equipment after an accident so you can recover quickly.

Workers’ Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover but also any disability or death benefits stemming from a work-related accident.

Commercial Umbrella Insurance

While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.

Business Interruption Insurance

If you must temporarily close after a fire, flood, or another natural disaster, business interruption insurance can cover some of your financial losses until you can reopen.

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 and commercial property insurance.

Read our Business Insurance for Skate Shops article for more info.

To start, you will need a storefront in a good location close to a local skate park. Renting such a site can cost over $1000 monthly, depending on the size. You will also need to budget for glass display cases for accessories, shelves for clothes, DVDs for skateboard videos, and tools for working on skateboards.

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

The largest ongoing expenses you’ll incur include keeping a large selection of inventory options for guests available and providing multiple skate events a year for marketing purposes.

Learn more about running a skate shop.

Money is directly generated through skateboard sales to customers.

Learn more about starting a skate shop.

Skate shops supply new skateboarding and longboarding supplies and equipment. Many also provide repair and maintenance services.

Skate shop owners are reported to profit upwards of $200,000 in a year.

Learn more about starting a skate shop.