Should I Start an LLC for My 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.