Last Updated: May 13, 2024, 8:41 am by TRUiC Team

Should I Start an LLC for My Ebook Store?

Starting a limited liability company (LLC) for your ebook 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 an ebook store, lawsuits can arise from things like misrepresentative claims about the extent of your library’s content, distributing copyrighted books without permission, or publishing books that contain libel.

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

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

An e-book propped up by a pile of books

Do I Need an LLC for an Ebook Store?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should start 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 an Ebook Store

By starting an LLC for your ebook 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.

Ebook stores will benefit from liability protection because of risks associated with the distribution of intellectual property. 

Example 1: The original author of a book files a copyright infringement lawsuit against your ebook store after discovering that it has been distributing copies without first acquiring legal consent. In the ensuing litigation, your personal assets will remain protected if your business is required to compensate the claimant. 

Example 2: In an advert recently published by your ebook store, your business is accused of making false claims about the content that is available on its platform in an attempt to attract new customers. This prompts one customer to sue your business for false advertising. In this example, the court will not be able to seize your personal assets in order to award damages.

Example 3: Your ebook store published an ebook that contained a defamatory statement about a popular brand. Upon discovering this, the brand decided to sue your business for defamation, seeking damages. In this scenario, limited liability will preclude you from being held personally liable. 

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 an Ebook 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 an ebook 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

Ebook 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 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 dependable 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 the limited liability protection from an LLC protects your personal assets, not your business assets.

If you own an ebook store, acquiring insurance is crucial. Not only does it provide you with a safeguard against unexpected risks, but it also lends credibility to your business and can help you remain compliant with your local and state laws.

Common Situations Business Insurance May Cover for an Ebook Store

Example 1: One of your main competitors files a libel lawsuit against your business. While you disagree with the claim, you know you need an attorney. General liability insurance would cover your legal defense costs.

Example 2: While you take a potential investor on a tour of your business, she slips, breaks a wrist in the resulting fall, and demands you pay for her medical treatment. General liability insurance would cover her medical care.

Example 3: As an employee shows a friend around the office, the friend trips over a box, breaks an arm, and decides to sue your business. General liability insurance would cover your legal defense costs.

Other Types of Coverage Ebook 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 ebook stores should obtain.

Product Liability Insurance

While you strive to sell ebooks that entertain and educate 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 fees and any required settlement.

Commercial Property Insurance

You made a major investment to establish your business. In the event of a fire, theft, or natural disaster, commercial property insurance would cover the cost of repairing or replacing your business-related property. This includes structural damage to your building as well as the business materials 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.

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.

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.

Read our Business Insurance for Ebook Stores article for more info.

If you own an ebook business, starting a store doesn’t require a significant upfront investment. Especially if you create your own books. That being said, there are a few necessary costs associated with starting up, including professional editing, cover design, and formatting. 

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

Ongoing expenses will include the cost of web hosting fees, editing, and cover designs.

Learn more about running an ebook store.

Profit is generated through the sale of copies of ebooks.

Learn more about starting an ebook store.

As technology advances, ebook stores have taken advantage of market trends, selling as many as 487 million ebooks per year. Though the market is dense, ebook stores have the potential to profit as much as six figures in a year.

Learn more about starting an ebook store.

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