Should I Start an LLC for My Gift Wrapping Business?

Starting a limited liability company (LLC) for your gift wrapping 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 gift wrapping business, lawsuits can arise from things like property damage claims (e.g., an employee accidentally damaging a client’s gift while attempting to wrap it, etc.).

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

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

Do I Need an LLC for a Gift Wrapping Business?

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 a Gift Wrapping Business

By starting an LLC for your gift wrapping 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.

Gift wrapping businesses will benefit from liability protection because of the risk of causing damage to customers’ gifts, theft, and other general business losses.

Example 1: You are at a wedding to deliver wrapped gifts. While the delivery man reverses the vehicle, he mistakenly hits a pile of chairs, and they break. The chair rental owners decide to sue you. Here, your business may be liable for possible compensation, but you, as the owner, will not be held responsible.

Example 2: Your employee moves wrapped gifts from the store to a client's car. While she struggles with the delivery, a gift falls into the rear windshield and cracks the glass. The car owner insists on suing. Your LLC will limit the lawsuit to your business, and you will be safe.

Example 3: Your employees work fast to meet rush orders during Christmas. While wrapping the gifts, a poorly woven wooden basket cuts her, causing her bodily harm. If she seeks redress in a court, your business may be held liable for compensation, but your private assets will not be affected.

Example 4: While gift wrapping a present for a customer, you accidentally drop the box, causing the present to break inside. The customer asks that you cover the replacement costs.

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 Gift Wrapping 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 gift wrapping 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

Gift wrapping 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 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.

Your gift wrapping business requires insurance to cover risks such as the loss of clients' gifts and damages to the delivery van.

Common Situations Business Insurance May Cover for a Gift Wrapping Business

Example 1: A customer brings in a stack of boxes for your team to wrap. She does not see a change in the level of the floor and trips, falling with all of her packages. Not only does she break her arm in the fall, but some of her expensive gifts as well. Your general liability insurance policy would likely cover the cost of her medical treatment and the replacement of her property.

Example 2: One of your employees is trying to keep up with the holiday rush. She overloads a handcart with packages to take from one part of the building to the other. In her rush, she runs the handcart into an obstacle and spills the packages onto the hard floor. The contents of multiple packages are smashed, including a number of expensive electronics. Your general liability insurance policy will likely cover the cost of replacing the property of your customers.

Example 3: The new logo you have purchased from a local artist is a hit with you, your employees, and your customers. Unfortunately, one of your competitors feels like the logo is too similar to her own logo, and she hires an attorney to sue your business over it. Your general liability insurance policy will pay for your legal fees in the event of a lawsuit against your company. It will also pay for any payouts or settlements if they are required.

Other Types of Coverage Gift Wrapping 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 gift wrapping businesses should obtain:

Workers’ Compensation Insurance

Most states require businesses with employees to carry workers’ compensation insurance. The policy that you carry for your employees will cover them should they become injured while performing job-related duties. For example, if an employee is climbing a ladder to access some wrapping materials on a high shelf and falls, workers’ comp would pay for the treatment of her injuries. It would also pay for some of the wages she loses while being unable to work.

Commercial Property Insurance

The various supplies and equipment you have purchased to make your gift wrapping business operational required a significant investment on your part. If an unexpected event like a fire were to destroy most or all of your supplies and equipment, it might be difficult to pay for replacements out of pocket. But with a commercial property insurance policy, you will not be forced to pay for it all on your own. Your policy will help to cover the costs of replacements, allowing you to get back to doing business sooner rather than later.

Commercial Auto Insurance

If you have one or more vehicles that you use primarily for business purposes, you need to have commercial auto insurance. Much like your personal auto insurance policy, commercial auto insurance provides financial protection for your commercial vehicles. In the event of an auto accident caused by you or one of your employees, your policy will help to cover the cost of repairing or replacing the vehicle and the vehicle of any other parties hit by your vehicle. It will also pay for medical treatments for injured parties.

Commercial Umbrella Insurance

An umbrella insurance policy is designed to pick up where a general liability insurance policy leaves off. Every general liability insurance policy has limits to what it pays out — once those limits are exceeded, the umbrella policy takes over to cover damages. Events that can exceed general liability insurance policies can include things like expensive lawsuits. Were your business to lose a lawsuit, the damages you were required to pay could exceed your general liability insurance policy. At that point, you could depend on your umbrella policy to take over.

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, commercial property insurance, and workers’ compensation insurance if you have employees.

Read our Gift Wrapping Business Insurance article for more info.

To start up your business, you will need gift wrapping essentials such as scissors, ribbons, tape, paper, and a portable wrapping table. You may also need a delivery van or reliable transportation to fit all your gift wrapping equipment.

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

The ongoing expenses of running a gift wrapping business will include rent, gift wrapping supplies, marketing, and payroll.

Learn more about running a gift wrapping business.

Gift wrapping businesses make money by charging customers a fee for wrapping their gifts.

Learn more about starting a gift wrapping business.

Gift wrapping businesses provide gift wrapping services for customers. Shopping malls are a common location for gift wrapping businesses, although some of them operate in their own space.

Gift wrapping businesses can bring in about $100 to $200 a day in profits during the holiday shopping season.

Learn more about starting a gift wrapping business.