Should I Start an LLC for My Jewelry Store?

Starting a limited liability company (LLC) for your jewelry 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 a jewelry store, lawsuits can arise from things like insurance disputes as well as from false advertising allegations (e.g., claiming that a piece of jewelry is more valuable than it actually is, etc.).

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

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

Do I Need an LLC for a Jewelry 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 a Jewelry Store

By starting an LLC for your jewelry 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.

Jewelry stores will benefit from liability protection because as with the sale of most other goods, risks are presented to the safety of customers when they visit your physical store locations. Businesses also run the risk of copyright or trademark brand infringement.

Example 1: While walking out of your store, a thief grabs your customer’s shopping bag, depriving them of the jewelry that they just purchased. When the customer turns around and demands their money back, you refuse. If a claim was to arise in court, your personal assets would remain protected as a result of your business’s LLC classification.

Example 2: Your LLC hires two part-time employees to assist you with your jewelry store during its busiest hours. If your business is unable to pay your employees in the future (in accordance with their contract), they will not be able to file a breach of contract lawsuit against you personally in order to be compensated.

Example 3: You partner with a third-party delivery service. After you are unable to pay them the agreed monthly fee, they decide to file a compensation lawsuit against your business. Since your jewelry store is registered as an LLC, the claimant will not be able to sue you personally in order to be compensated, regardless of whether your business is unable to pay them.

Example 4: A customer experiences a severe allergic reaction due to one of the metals used in a necklace from your store. They ask you to cover their medical expenses.

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 Jewelry 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 a jewelry 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

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

Jewelry stores in particular, since they work with high-value materials, need insurance in order to protect their business assets (e.g., jewels, company vehicles, gemstones, etc.).

Common Situations Business Insurance May Cover for a Jewelry Store

Example 1: A customer is looking at a display case when she leans too hard on the glass. The glass breaks, severely cutting her hand, and she requires immediate medical care. A general liability insurance policy will likely assist in paying for her medical treatment.

Example 2: You have hired a marketing firm to develop a new ad campaign for your jewelry business. One of your competitors files a lawsuit, claiming the ad libeled her business. Your general liability insurance policy will pay for the cost of your legal defense. It will also pay for the cost of a settlement if it is necessary.

Example 3: One of your employees is rushing to answer a ringing phone when he accidentally runs into a customer. The impact knocks the customer into a display case, causing him an injury that requires medical care. He decides to sue your business. Your general liability insurance policy will pay your legal costs, including any payouts or settlements that you wind up paying as a result of the lawsuit.

Other Types of Coverage Jewelry 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 jewelry stores should obtain:

Product Liability Insurance

There is always the chance that a customer could decide that one of your products caused them injury. If this happens and the customer files a lawsuit, your product liability insurance would pay for hiring an attorney and your various legal costs. It would also cover the cost If you settle the case out of court.

Commercial Property Insurance

Stocking inventory for a jewelry business is a serious financial investment. If something were to happen that destroyed your inventory, like a major fire, it would be extremely costly to replace. Commercial property insurance would help to pay for the replacement of your inventory.

Workers’ Compensation Insurance

In most states, if you have employees, you are required by law to carry workers’ compensation insurance. If one of your employees is injured performing a work-related task and requires medical care, workers’ comp insurance would pay for it. Your policy would also help to cover the employee’s lost wages if they were unable to work due to the injury.

Crime Insurance

Crime insurance is designed to protect your jewelry business if you are the victim of criminal activity—whether the criminal activity is performed by your employee or by someone not associated with your business. Should a crime occur, like an employee stealing some of your inventory, then your crime insurance policy would help to cover the cost of damages to your business.

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.

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

Starting a jewelry store business can cost you anywhere between $20,000 and $100,000, depending on the size of your store.

You will need to lease or purchase a suitable space to use as a storefront (unless you operate from your home), as well as purchase basic raw materials and more expensive gemstones and metals in order to make jewelry.

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

Common recurring expenses will include supply costs, rent, and labor. The larger the operation, the more money it usually costs to run.

Learn more about running a jewelry store.

Stores make money through the fabrication and sale of precious metals, gemstones, and jewelry pieces. Set prices are paid for pieces based on materials, labor costs, and the up-mark charged by the jeweler in order to profit.

Learn more about starting a jewelry store.

Involved in the fabrication and sale of unique jewelry pieces, jewelry stores are a popular stop for those looking to give someone something unique for special occasions and celebrations. Some stores are also involved with reselling second-hand jewelry pieces of value as well.

The average jeweler makes around $40,000 a year; however, those with larger shops in prime locations have the potential of making much more.

Learn more about starting a jewelry store.