Should I Start an LLC for My Art Gallery?

Starting a limited liability company (LLC) for your art gallery 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 art gallery business, lawsuits can arise from things like damaging artwork, or exhibiting a piece of artwork without first getting approval from the creator(s).

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

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

Do I Need an LLC for an Art Gallery?

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 Art Gallery

By starting an LLC for your art gallery, 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.

Art galleries will benefit from liability protection because of the risk of being sued for libel of other businesses, personal injuries to customers, damage to property, and more.

Example 1: Two employees in your art gallery are carrying an exhibit when one trips over, causing the heavy object to fall upon a customer. As a result of the serious injuries inflicted upon them, the customer brings a claim against your business for compensation. In this instance, limited liability would protect you from being held personally responsible.

Example 2: Your art gallery takes out a large loan in order to buy a famous painting. However, it defaults on the repayment of this debt, including the lender to start a debt collection lawsuit against your business to recover these funds. Limited liability would protect your personal assets - only allowing the plaintiff to recover from your business’s assets.

Example 3: During the delivery of a new piece of artwork to your art gallery, your business’s van collides with a customer’s vehicle and severely damages it. The customer sues your business for the property damage, claiming your business should foot the bill for replacing the car. The limited liability protection of LLCs would restrict repayment of this sum to business assets alone.

Example 4: A competing art gallery owner claims that your marketing campaign makes false claims about their business. They decide to sue your gallery.

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 Art Gallery

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 art gallery 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

Art galleries 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?

Yes, all LLCs should have insurance in order to ensure their business assets are sufficiently protected.

The limited liability of LLCs protects the personal assets of their owners, but insurance is required in order to provide similar protection for the assets belonging to the business.

Common Situations Business Insurance May Cover for an Art Gallery

Example 1: While a visitor’s child plays near a small sculpture on a pedestal, he bumps the pedestal and causes the sculpture to fall. The impact breaks the child’s foot, and his mother demands you pay for his medical treatment. General liability insurance would cover the child’s medical bills.

Example 2: During a visit to your gallery, an artist slips on a slick spot on the floor and breaks her wrist. She sues your company, claiming you didn’t display a sign warning of the danger. General liability insurance would cover your legal fees and any required settlement.

Example 3: As an employee transports a large piece of art on a handcart to a customer’s car, she loses control and the cart slams into the customer’s luxury vehicle. General liability insurance would cover the customer’s vehicle repair costs.

Other Types of Coverage Art Galleries 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 art galleries should obtain.

Commercial Property Insurance

You made a major investment in the artwork you display and store in your gallery. If you own the building in which you operate, commercial property insurance would cover the cost of repairing or replacing your business-related property in the event of a fire, theft, or natural disaster. This includes structural damage to your building or grounds as well as the artwork and business equipment housed there.

Professional Liability Insurance

While your clients come to you for knowledgeable advice and guidance about works of art, there’s always a chance someone could accuse you of errors that caused them harm. If a client files a lawsuit based on your advice, professional liability insurance would cover your legal fees and any required settlement.

Commercial Auto Insurance

Any car or truck you use primarily for business requires commercial auto insurance to protect the vehicle, driver, and others on the road in the event of an accident. Be sure to select a policy that covers not only accident-related vehicle repair costs and medical treatment for anyone injured, but also sufficient protection for any artwork or other business materials you carry in your vehicle.

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.

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 Art Gallery Business Insurance article for more info.

The largest expense when starting up your gallery will be rent. The space you choose greatly influences how much you will pay (i.e. a space in Key West may cost $1600 per month, while another in Soho costs up to $100,000).

Additionally, you should also expect to pay for your business license fee, a robust inventory business management system, and a reputable commercial email platform.

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

Ongoing expenses include rent, salaries, marketing, special events, and transporting artwork.

Learn more about running an art gallery.

The main way an art gallery makes money is by taking at least 50% of artwork sales. The specific percentage is negotiated with each artist.

Learn more about starting an art gallery.

Art galleries are important establishments in a community that provide local artists a place to display their art and gain more exposure. While most art galleries are open to the general public, collectors, investors, decorators, and private companies are big customers.

An art gallery’s average profit margin is 6.5%, but profits could be more or less depending on the number of pieces sold and the price of each piece.

Learn more about starting an art gallery.