Last Updated: October 2, 2024 by TRUiC Team


Do I Need an LLC for My Interior Design Business?

Starting a limited liability company (LLC) for your interior design 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 an interior design business, lawsuits can arise from things like disagreements with clients about whether a consultation is included within the contractual fee or an inability to return creditors what they are owed in a timely manner.

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

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Interested in getting started? More than 84% of our readers form their LLC through a specialized LLC formation service in order to save time and avoid potential penalties.

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Do I Need an LLC for an Interior Design 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 an Interior Design Business

By starting an LLC for your interior design busines, 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.

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

Example 1: Your interior design business is sued by a contractor who alleges your business owes her for a consultation fee. You believe the “consultation” is really a pre-contractual negotiation. If she wins her suit, your personal assets will be protected from making the payment and any award of damages. 

Example 2: Your interior design business is unable to service a term loan it took out to purchase equipment. The bank sues. If judgment goes against you, only your business assets can be levied on to pay the loan. Your personal assets are protected.

Example 3: Your interior design business is forced to close after becoming insolvent. Despite the setback, be comforted by the fact that unpaid creditors cannot go after your personal assets, which are protected by the limited liability shield of your LLC.   

Example 4: You order a heavy new dresser for a client that requires installing it to the wall for safety. The wall is not suited for maintaining this level of weight, so the dresser comes loose and falls, injuring the client. She has several broken bones and opts to sue.

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 Interior Design 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 an interior design 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

Interior design 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 loansgrants, and credit.

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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.

Interior design businesses need professional liability insurance that provides coverage for personal injury (such as libel and slander), legal fees, and claims against negligently-rendered services.

Common Situations Business Insurance May Cover for an Interior Design Business

Example 1: You install a heavy new dresser in your studio, screwing it into the wall for safety. The wall is not suited for maintaining that level of weight, and the dresser comes loose, tipping forward and landing on a visiting client. She has several broken bones and opts to sue. General liability insurance could probably help cover medical expenses ordered by the court or a settlement decided on by your business and the plaintiff.

Example 2: You are replacing an outdated light fixture in order to bring a new look to your client’s living room. However, as you do so, you accidentally produce a short in the electrical system, sparking a fire and badly damaging half of the home before firefighters can get it under control. The homeowner sues you for these pricey damages. General liability insurance would likely help your business cover court-ordered payments or a settlement.

Example 3: As you explore a client’s home gathering ideas, you back into an expensive statuette—a work of art purchased for several thousand dollars. The statuette cracks on the floor. If liable for these damages, general liability insurance could help your business cover anything owed from a lawsuit or a settlement.

Other Types of Coverage Interior Design 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 interior design businesses should obtain.

Commercial Auto Insurance

Since you will be driving your business vehicle on public roadways, you are mandated by the state to carry a commercial auto policy. Auto insurance protects not only your vehicle but any liability you may have in an accident. Your personal car insurance will not cover you if you are driving the company vehicle, even if you are off duty.

Commercial Property Insurance

If you own your location instead of renting, you need commercial property insurance to protect the building. If your business is based out of your home, your homeowners’ insurance will not cover the home when it is being used for commercial purposes. Property insurance also covers items owned by your business.

Interior design businesses invest heavily in the equipment that is used to complete their work. Be sure that you have enough coverage to replace all of your equipment in the case of a loss. This coverage is generally offered in a Business Owner Policy (BOP).

In addition to the policies outlined above, there are a few other types of coverage your interior design business may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.

Workers’ Compensation Insurance

If your interior design business has any employees (full-time or part-time), you are legally required to carry workers’ compensation insurance. This type of coverage will help compensate your employees in the case that they get injured on the job.

Read more about workers’ compensation insurance.

Business Interruption Insurance

In the event of a fire, flood, or other catastrophes, there is a good chance your business operations will be halted for some time. Business interruption coverage is designed to help you recoup a portion of the revenue your business would lose due to the inability to operate.

This type of insurance is typically included in a business owner’s policy.

Commercial Umbrella Insurance

Umbrella coverage allows you to extend above and beyond the standard limits of your other business insurance policies. If you are faced with a large lawsuit or other claim situation, there’s a possibility that the coverage limits of your standard policies will be insufficient. In this case, your umbrella policy will allow you to surpass these limits.

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 as well as workers’ compensation insurance if you have employees.

Read our Interior Design Business Insurance article for more info.

Startup costs for an interior design business vary from $500 to $30,000 depending on the scale and range of services you intend to provide. The business can provide a very basic service or be full-service. Ongoing expenses might include studio rent, salaries, and commercial insurance.

Visit our How to Start an Interior Design Business guide to learn more about the costs of starting and maintaining this business.

Marketing costs, an office lease, insurance, employee salaries, and transportation costs are the main ongoing expenses.

Learn more about running an interior design business.

An interior design firm can charge a flat fee for a project or can determine a price based on time spent, a percentage of the total cost, or other factors.

Learn more about starting an interior design business.

An interior designer’s job is not just to decorate but to understand how people interact with indoor spaces. An interior design business is able to work with many types of buildings. These can include, for example, offices, homes, museums, and places of worship.

That being said, most interior design firms choose to specialize in residential or commercial spaces.

An interior design firm’s profits depend on its clientele, business volume, and how many employees it has. 

Learn more about starting an interior design business.