What are the costs to start and maintain a baby store?

You will need quite a large budget to start a baby store business. This is because you will need: To lease or purchase a storefront Hire staff (depending on the size of your store) At least one computer Display racks Inventory orders We estimate that an average-size baby store will need between $250,000 and $500,000 to start. Your largest maintenance expense will likely be payroll and inventory. Visit our How to Start a Baby Store guide to learn more about the costs of starting and maintaining this business.

Should I Start an LLC for My Baby Store?

Starting a limited liability company (LLC) for your baby 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 baby store business, lawsuits can arise from things like selling products that are too similar to a competitor’s, or a customer’s child being injured in your store.

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

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

Do I Need an LLC for a Baby Store?

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 a Baby Store

By starting an LLC for your baby 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.

Baby stores will benefit from liability protection because retail businesses, including baby stores, face the risk of product liability, workplace accidents, and financial data breaches.

Example 1: While purchasing clothes for their baby, a customer slips down and fractures their elbow. Claiming that this is a result of the floor being wet and slippery, they file a lawsuit against your LLC for negligence, seeking compensation. Here, your LLC status will ensure that, as long as your personal negligence didn’t injure the claimant, your personal assets will remain protected.

Example 2: After a very busy day, you discover that your neighbor has filed a nuisance claim against your LLC, claiming that the loud baby customers are stopping him from enjoying his mornings. Regardless of the validity of the claim, your limited liability will prevent you from having to personally reimburse such a claimant.

Example 3: After agreeing to lease a second property, your business’s accountant lets you know that you’ll have to cut back on your expansion plans as a result of a recent decline in revenue. When the owner of the second property finds out, they claim that you are in breach of a contract and threaten to sue your LLC. If the agreement you made did constitute a binding verbal contract in law, your personal assets would remain protected as a result of your LLC status.

Example 4: A large store display falls, injuring a customer and their child. They decide to sue you for the resulting 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 Baby 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 baby 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

Baby 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).

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?

As a baby store business, your LLC will likely be required to have some form of business insurance. This is because you will most likely hire employees, and workers’ compensation is required by most states by law.

Regardless, getting business insurance is generally recommended for all LLCs that have valuable assets that they want to protect (e.g., storefronts, company vehicles, etc.).

Common Situations Business Insurance May Cover for a Baby Store

Example 1: A customer sets his baby on a fold-out shelf that he assumes is meant for diaper changing. The shelf is actually a panel that opens for access to an air duct below. It flips downward, dropping the infant on the floor and causing a serious head injury. If found liable, your business would probably be covered by general liability insurance for any resulting settlement or court-mandated medical payments.

Example 2: A mother allows her child to wander while she shops in your store. The child pulls out a shopping cart and begins using it to roll around the store. One of your employees asks him to stop, but the boy rides his cart into a product display, knocking it down onto his head. If found liable for the accident, general liability insurance could probably help cover any medical expenses or settlements.

Example 3: Your business owns both its storefront and the surrounding parking lot, including a large parking garage. Finding it difficult to navigate through your garage, a customer turns the wrong way into a one-way passage and collides head-on with another car. If found liable, your business could probably rely on general liability insurance to assist in coverage for anything a court decided you owed or any settlement reached.

Other Types of Coverage Baby 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 baby stores should obtain:

Product Liability Insurance

Infants are among the most vulnerable consumers, and it is highly important that any products intended for their use be deemed completely safe. However, if a mistake is made, or a manufacturing error occurs, a baby toy or consumable could prove harmful, or even lethal, to an infant. Product liability insurance is always worth acquiring for baby store businesses.

While your company may exercise incredible caution and run its inventory through a safety research process, even a responsible baby business owner needs to make sure that their losses are covered in the event that one of their sold products harms an infant.

Commercial Property Insurance

Nearly all businesses would be wise to pick up a commercial property insurance policy. If your storefronts contain valuable merchandise, an investment in this policy can make the difference between going out of business and overcoming a setback. When fires or violent weather impact your business, damaging or destroying costly chunks of your inventory, commercial property insurance covers the value of these losses plus damages to any owned real estate. It can also cover damages to equipment like motorized pallet carriers and similar indoor vehicles.

Workers' Compensation Insurance

A business is only as productive as its employees, and if you bring hired help on board, this policy is essential. Workers’ compensation insurance is mandatory for businesses with part-time or full-time employees. Workplace accidents are covered by this insurance, including the provision of disability and death benefits. Workers and their families deserve coverage, comfort, and peace of mind. A compensation policy provides exactly that while protecting your business from damages to employees that occur on-site.

Business Interruption Insurance

Working especially well in tandem with commercial property insurance, this policy covers unfortunate businesses that suffer serious losses due to fires, tornadoes, and similar disasters. Business interruption insurance assists in covering estimated profit losses during downtime, and it can sometimes cover costs associated with temporarily relocating your business. An interruption policy can be the difference between crippling financial damages and a challenging setback.

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 Baby Store Insurance article for more info.

You will need quite a large budget to start a baby store business. This is because you will need:

To lease or purchase a storefront
Hire staff (depending on the size of your store)
At least one computer
Display racks
Inventory orders

We estimate that an average-size baby store will need between $250,000 and $500,000 to start. Your largest maintenance expense will likely be payroll and inventory.

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

Some typical operating expenses for baby stores are rent, payroll, and inventory.

Learn more about running a baby store.

Baby stores make money by buying baby products at wholesale prices and then selling them to customers at retail prices.

Learn more about starting a baby store.

As the name suggests, baby stores sell products targeted towards babies and toddlers.

Small, boutique baby stores may carry more expensive items, while larger stores may focus more on providing a lower-cost option.

The average profit margin for apparel is 5% to 10%, with other items like baby furniture having higher margins.

Learn more about starting a baby store.