Should I Start an LLC for My Aromatherapy Business?

Starting a limited liability company (LLC) for your aromatherapy 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 an aromatherapy business, lawsuits can arise from things like false advertising allegations, or client injuries as a result of suffering an allergic reaction during treatment.

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

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

an essential oil bottle and a lavender plant

Do I Need an LLC for an Aromatherapy Business?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form 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 an Aromatherapy Business

By starting an LLC for your aromatherapy 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.

Aromatherapy businesses will benefit from liability protection because of the risk of product liability, trademark infringement, financial data breaches, and even workplace accidents.

Example 1: Your aromatherapy business produces false advertising that is misleading about the health benefits of your essential oils, leading a customer to bring a lawsuit against your business for these false claims. Any damages your business may be liable to pay can only be levied against the business’s assets, rather than your personal assets.

Example 2: During treatment, an employee of your aromatherapy business uses an essential oil that triggers a severe allergic reaction in a customer. This leads the customer to sue your business for the substandard care they received. In this event, your personal assets would be protected if your business was found liable to pay damages.

Example 3: A hacker manages to gain access to your electronic booking system and steals confidential medical and financial information related to your customers. If an affected client decided to sue for damages as a result of this information leak, your business would only be liable to pay such damages with business assets, and not your own.

Example 4: A customer sues your business, claiming that one of the oils you sell contains impurities that made them sick.

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 an Aromatherapy 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 an aromatherapy 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

Aromatherapy 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 LLCs require business insurance. It is necessary in order to protect the assets belonging to your business.

This is distinct from the protection that limited liability grants to the personal assets of an LLC’s owners.

Common Situations Business Insurance May Cover for an Aromatherapy Business

Example 1: A customer trips over a box while exploring your products, hits her head and needs immediate medical care for a concussion. She demands repayment of her medical expenses because you did not keep your aisles clear. General liability insurance would cover the customer’s medical bills.

Example 2: An employee slips while stocking a shelf and accidentally drops a heavy box on a customer. The customer breaks a wrist in the resulting fall and decides to sue. General liability insurance would cover your legal fees and any damages awarded in a settlement.

Example 3: A competitor files a lawsuit, claiming your latest marketing campaign damaged their business. General liability insurance would pay for your legal fees and any settlement costs.

Other Types of Coverage Aromatherapy 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 aromatherapy businesses should obtain.

Product Liability Insurance

While you provide clear instructions on how to use your aromatherapy products safely, there’s always a chance a customer may file a lawsuit if they believe one of your products injured them. Product liability insurance would protect your business by covering your legal fees and any damages awarded in a settlement.

Commercial Property Insurance

You’ve made major investments in your inventory of aromatherapy products and supplies. 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 natural disaster. Commercial property insurance would cover the cost of replacing your inventory after an accident so you can recover quickly.

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.

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 benefits stemming from a work-related accident.

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 product liability insurance.

Aromatherapists can expect startup costs to fall somewhere between the $10,000-$30,000 range. If you intend to operate from a storefront, this will raise the estimated cost.

The reason for this high cost is because of all the specialist supplies that need to be purchased, such as essential oils, distiller and propane source, and chemical-free land to grow plants.

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

Operating expenses for an aromatherapy business can include rent, the cost of growing the raw materials, bottling and labeling expenses, insurance, payroll, and shipping.

Learn more about running an aromatherapy business.

Aromatherapy businesses make money by selling aromatherapy products and possibly services.

Learn more about starting an aromatherapy business.

Aromatherapy businesses sell aromatherapy products like soaps, essential oils, and diffusers. Some aromatherapy businesses act as a middleman, selling products that they buy from wholesalers or producers, while others actually grow the plants used to produce the products.

Potential profits for an aromatherapy business can vary considerably depending on the quantity and type of products and services you sell.

Learn more about starting an aromatherapy business.