Should I Start an LLC for My Balloon Distribution Business?

By starting an LLC for your balloon distribution 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.

Balloon distribution businesses will benefit from liability protection because of the risk of product liability, workplace accidents, trademark infringement, and even libel. 

Example 1: After supplying balloons to a nearby kid’s party, you find out that a neighbor has filed a nuisance lawsuit against your LLC. Since you benefit from limited liability, you know that your personal assets will never be put into play if you have to reimburse the claimant. 

Example 2: After renewing your LLC’s lease, you change your mind and decide that you would like to move your business to a different area. When your current building’s landlord threatens to sue you for breach of contract, you realize that your LLC may need to compensate the landlord as a result of the early termination, but your personal assets will be protected.

Example 3: After a balloon pops into a child’s ear, her parents claim that it has resulted in tinnitus, and demand compensation. If they file a lawsuit against your LLC, your personal assets will remain protected regardless of the outcome of the claim. 

Example 4: A competing business sues your company, claiming that your business’s logo infringes on their copyrighted design.

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 Balloon Distribution 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 balloon distribution 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

Balloon distribution 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.