Do I Need an LLC for My Custom Phone Case Business?

Starting a limited liability company (LLC) for your custom phone case 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 custom phone case business, lawsuits can arise from things like intellectual property law infringements (e.g., selling a phone case that contains trademarked or copyrighted work, etc.) or defective products.

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

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

6 colored custom phone cases display on a desk

Should I Start an LLC for My Custom Phone Case 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 Custom Phone Case Business

By starting an LLC for your custom phone case 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.

Custom phone case businesses will benefit from liability protection because of the risk of claims of libel, trademark infringement, workplace accidents, and product liability.

Example 1: Some football fans organize a local tour and order phone cases with the design of their club customized on them. Later, they returned with complaints that the wrong color combination was used and demanded a refund. If a legal issue arises, only your business may be at risk, not your private assets.

Example 2:You rent a walk-in shop for your business and hire the services of a sales rep. You owe your employee four months of unpaid salaries because you recently experienced a decline in sales. If they decide to sue, your business may be sued and not you.

Example 3: A customer orders a custom phone case for androids. He returns them with complaints that some don’t fit appropriately on the phones. He asks for replacements or a refund. If he goes to sue, your LLC may be held responsible for compensation, but it will protect your personal assets from any required payment.

Example 4: A customer sues you, claiming that a phone case they bought from you failed to adequately protect their phone and caused it to break when it fell.

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 Custom Phone Case 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 custom phone case 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

Custom phone case 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 trusted 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?

It is vital to purchase insurance for your LLC because all businesses need insurance to enjoy protection from potential business risks. Insurance will cover custom phone case businesses from threats such as property damage and legal issues from clients and employees.

Common Situations Business Insurance May Cover for a Custom Phone Case Business

Example 1: A customer slips on a patch of water an employee failed to clean up at your retail location. The customer breaks a leg in the fall and sues your company for unsafe conditions. General liability insurance would cover the injured customer’s medical treatment.

Example 2: An unrelated media company claims your business name is similar to its name and sues for loss of income due to perceived confusion on the part of its customer base. General liability insurance would cover your legal costs to fight the claim or settle out of court.

Example 3: An employee spills water over your high-end, custom printer, damaging it beyond repair. General liability insurance would cover the cost of replacing your equipment.

Other Types of Coverage Custom Phone Case 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 custom phone case businesses should obtain.

Commercial Property Insurance

If you own the building in which you operate, commercial property insurance helps protect your business-related property from a variety of events, such as theft, vandalism, and extreme weather. It covers the cost of repairing the structure as well as repairing or replacing any equipment and products you store there.

Workers’ Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. 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.

Product Liability Insurance

Product liability insurance protects your business in the event of any product defects. If someone claims one of your custom phone cases caused them injury or illness, product liability insurance would cover your legal fees and any awarded damages stemming from a lawsuit.

Data Breach Insurance

If your company conducts most of its business online, you face the risk of a cyberattack. Data breach insurance covers damages resulting from a successful hack of your or your customers’ information.

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.

Home-Based Business Insurance

If you run any part of your business from home, you may need home-based insurance to safeguard your commercial equipment and space in your home devoted to your business. A typical homeowners insurance policy may only cover certain expenses if you don’t disclose you use your home for business purposes.

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 possibly product liability insurance.

Read our Business Insurance article for more info.

If you plan to start small, you can purchase a startup kit that includes a heating press for around $3,500; otherwise, you will need up to $30,000 to perform on a large scale. You will also need to pay for machinery maintenance and state license fees.

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

The regular expenses of a custom phone case business include maintenance of machinery, marketing, design, production, and supplies and fees.

Learn more about running a custom phone case business.

Custom phone case businesses make a profit by selling custom phone cases at a markup.

Learn more about starting a custom phone case business.

A custom phone case business designs and creates unique phone cases for customers. Some provide online tools so that customers can design their own phone case using a template, while others work directly with customers to create cases.

Profits for a custom phone case business can be very high, with markups often around 400%.

Learn more about starting a custom phone case business.