Last Updated: May 14, 2024, 12:23 pm by TRUiC Team

Should I Start an LLC for My Bookstore?

Starting a limited liability company (LLC) for your bookstore 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 bookstore, lawsuits can arise from things like copyright infringement allegations (as a result of selling a book without receiving consent from its publisher), breach of contract disputes, and business debt accrual. 

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

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

an open book on a table of a bookstore

Do I Need an LLC for a Bookstore?

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 Bookstore

By starting an LLC for your bookstore, 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.

Bookstores will benefit from liability protection because of the risk of being sued for personal injuries, property damage, and trademark infringement. 

Example 1: You own a bookstore LLC, which you started with $10,000. The LLC has run up debts of $15,000 under a contract with a publisher who is threatening legal action. Luckily, this unfortunate development will not affect your personal assets, which are protected by the limited liability of the LLC.   

Example 2: Your old school friend invites you to invest in his bookstore, which is set up as an LLC. You invest $5,000. The bookstore is subsequently sued for $20,000 by a creditor. Fortunately, you will enjoy the limited liability protection of the LLC. The creditors cannot go after your personal assets to satisfy the debt. 

Example 3: You own a bookstore and invite a couple of friends to invest $2,500 each. They are willing but concerned they could be on the hook for more if things go south. You reassure them that the limited liability of an LLC restricts an investor’s loss to the amount he invests.  

Example 4: You choose a logo for your business that you like and begin to use it on your marketing materials. A competitor decides that your logo is too similar to theirs and files a lawsuit against your business.

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 Bookstore

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 bookstore 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

Bookstores 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 loansgrants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

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 businesses need insurance because of the variety of risks they encounter. In particular, bookstores need fire insurance because of the risk of fire (lots of paper around), and also general liability insurance, as people tend to spend a while browsing. 

LLCs protect personal assets. Business insurance protects business assets.

Common Situations Business Insurance May Cover for a Bookstore

Example 1: While trying to pull a book from the top shelf, a customer pulls the entire bookshelf down on top of himself. He is injured in the process and requires medical care. A general liability insurance policy will pay the medical bills for the customer’s injuries.

Example 2: A customer brings you a rare book to examine. One of your employees accidentally spills a cup of coffee on the book, ruining it. The customer expects you to pay for a replacement if one can be found. Your general liability policy will pay for the repair or replacement of customer property that is damaged by you or your employees.

Example 3: You choose a logo for your business that you like and begin to use it on your marketing materials. A competitor decides that your logo is too similar to theirs and files a lawsuit against your business. The general liability insurance you have will pay for your legal fees if you are sued by a competitor or a customer, and it will also pay for a settlement if you wind up settling out of court.

Other Types of Coverage Bookstore 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 bookstores should obtain.

Commercial Property Insurance

The books in your store are the foundation of your livelihood. Losing them to an unforeseen event, like a fire, would make it extremely difficult to keep your business going. Carrying a commercial property insurance policy will help you avoid having to pay for replacing your books and other commercial property out of your own funds.

Workers’ Compensation Insurance

The employees in your bookstore need the protection offered by workers’ compensation insurance. This coverage will pay for medical care for employees injured in job-related duties as well as cover the cost of lost wages should the employee be unable to work for a period of time. Workers’ comp is mandated by most states for employers, although the specifics of each state vary.

Commercial Umbrella Insurance

There are limits to a general liability insurance policy. Once those limits are reached, the policy will stop paying, and you will be left to pick up any extra expenses—unless you have commercial umbrella insurance. With a commercial umbrella insurance policy, once your general liability insurance policy limits are reached, the umbrella policy will take over.

Commercial Auto Insurance

If you have a vehicle that you use for primarily business purposes, you will need to have a commercial auto insurance policy. The policy you have for your commercial vehicle will protect you, your employees, and anyone else involved in an accident with the commercial vehicle. It will pay for medical care for the injured and any property damage caused by the vehicle.

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 Bookstore Business Insurance article for more info.

Getting a bookstore up and running will involve some fixed costs, like those for fixtures — $4,000; a stock system — $7,500; signage and furnishings — $5,500; and marketing materials — $5,000. The main recurrent costs will be rent, salaries, utilities, and insurance, approximately $3,500 a month. 

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

Rent, inventory, and employee salaries will constitute the bulk of your ongoing expenses.

Learn more about running a bookstore.

Bookstores make money by selling books at a profit.

Learn more about starting a bookstore.

Though big-box stores are on the rise, there is still a market for bookstores — especially if they sell books through an online storefront. Many bookstores also boost their profits by offering cafe services in their physical locations.

A bookstore selling new books should be able to make about a 40% profit.

Learn more about starting a bookstore.

Related Articles

Article Sources

IRS: Limited Liability Company

IRS: S Corporations


SBA: Small Business Guide

SBA: Choose a Business Structure Guide

US Census Bureau: Small Business Statistics

SBA Office of Advocacy: Data on Small Business

FRED: SBA Data for Small Business