Do I Need an LLC for My Cabinet Making Business?

Starting a limited liability company (LLC) for your cabinet making 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 a cabinet making business, lawsuits can arise from things like falsely advertising the quality of a line of cabinets or an employee improperly installing cabinets in a customer’s house (leading to damage).

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

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

Should I Start an LLC for a Cabinet Making 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 a Cabinet Making Business

By starting an LLC for your cabinet making 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.

Cabinet making businesses will benefit from liability protection because home restoration services, including cabinet makers, face a variety of risks associated with customers visiting business locations. Additionally, liability issues can arise around the safety of guests while working in their homes and the potential to damage personal property.

Example 1: While unloading a cabinet from your vehicle to install in a customer’s home, an employee drops the cabinet damaging their car. The customer asks you to cover their repair’s expenses. Since your cabinet making business is an LLC, limited liability ensures your personal assets could not be utilized to pay for the expenses.

Example 2: A customer is suing you after a bug infestation occurs claiming that they came in with the cabinets your business installed. If the court decides you must pay, limited liability from being an LLC would protect your personal assets, only allowing your business’ assets to be used to pay.

Example 3: A competitor claims that you have breached their copyright on the design of your newest cabinet and are threatening legal action. Should your business have to pay for damages and a settlement, your personal assets would be protected due to limited liability from your status as an LLC.

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 Cabinet Making 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 cabinet making 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

Cabinet making 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 businesses need insurance to protect their business assets — even LLCs. This is because limited liability protection from being an LLC protects your personal assets, not your business assets.

Insurance will protect the assets you use to work like your tools and vehicles so if they are damaged you can get help replacing them.

Common Situations Business Insurance May Cover for a Cabinet Making Business

Example 1: While visiting your workshop, a customer slips on some sawdust, breaks a wrist, and demands you pay for his medical treatment. General liability insurance would cover his medical bills.

Example 2: As you transport a set of cabinets to your work van, you trip and lose control of the hand truck. The hand truck slams into the side of a customer’s luxury sedan. General liability insurance would cover the customer’s vehicle repair costs.

Example 3: While you install cabinets in a customer’s home, the customer trips over your tool bag, breaks an arm, and decides to sue. General liability insurance would cover your legal defense costs and any required settlement.

Other Types of Coverage Cabinet Making 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 cabinet making businesses should obtain.

Product Liability Insurance

While you strive to make cabinets that truly satisfy your customers, there’s always a chance someone might claim your product caused them harm. In the event of a lawsuit, product liability insurance would cover your legal defense fees and any required settlement.

Commercial Property Insurance

You made a major investment to establish your cabinet making business. If you own the workshop 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 workshop as well as the tools, equipment, and other supplies you store there.

Workers’ Compensation Insurance

If you have any employees, most states will require you to carry workers’ compensation insurance for both part-time and full-time workers. 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 or death 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 commercial property insurance.

Read our Business Insurance for Cabinet Making Businesses article for more info.

The startup costs for a cabinet making business range from about $2,000 to $10,000. Woodworking businesses can operate out of a garage at first to save on cost, with initial funds going towards lumber and equipment, which can be bought used to further savings.

The ongoing expenses for a cabinet making business include the cost of materials, paying for a workshop, and equipment depreciation.

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

The manageable ongoing expenses of running a cabinet making business include the cost of additional materials, workshop expenses, vehicles, wages, and equipment depreciation.

Learn more about running a cabinet making business.

Cabinet making businesses profit from the sale of cabinets to individual customers.

Learn more about starting a cabinet making business.

Cabinet making businesses are involved in the process of offering home cupboard restoration services including the installation, removal, or replacement of cabinets and storage features throughout homes and building establishments.

With a well-established client base, cabinet makers have the potential to profit as much as six figures in a year.

Learn more about starting a cabinet making business.