What are the costs to start and maintain a laser cutting business?

Starting a laser cutting business can be quite expensive. This is because you will need to: Purchase a laser system, work computer, and business software Lease or purchase a garage or studio Purchase business insurance Hire labor (depending on the size of your laser cutting business) Visit our How to Start a Laser Cutting Business guide to learn more about the costs of starting and maintaining this business.

Should I Start an LLC for My Laser Cutting Business?

Starting a limited liability company (LLC) for your laser cutting 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 laser cutting business, lawsuits can arise from things like employee mistakes (e.g., engraving a customer’s name incorrectly on a piece of jewelry) as well as wrongful termination allegations and personal injury disputes.

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

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

Do I Need an LLC for a Laser Cutting 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 Laser Cutting Business

By starting an LLC for your laser cutting 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.

Laser cutting businesses will benefit from liability protection because custom tool and design businesses, including laser cutting businesses, face a variety of risks, including employee or customer injuries in your workplace and the potential to damage clients’ property with lasers or other tools.

Example 1: When one of your employees engraves the wrong name on your client’s engagement ring, a compensation lawsuit is filed against your LLC. If your business is unable to pay the claiming party, your personal assets will remain out of bounds as a result of your limited liability.

Example 2: After a fall in revenue, you are unable to pay one of your business’s employees and decide to terminate his employment. Since his contract requires you to give him one month’s notice, you find yourself facing a breach of contract lawsuit. Since the employment contract was made between your LLC and the employee, your personal assets will remain shielded from the claimant regardless of how the lawsuit progresses.

Example 3: You hire a PPC marketing agency to advertise your services online. When your business receives the invoice, you realize that you will struggle to pay the agency immediately, and ask them whether you could do it in installments. If they refuse and file a lawsuit against your business, your LLC’s classification will ensure that your personal assets will remain protected from the claiming party.

Example 4: While personalizing a customer’s personal keepsake, you accidentally break the keepsake. They decide to sue you for the resulting damages.

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 Laser Cutting 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 laser cutting 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

Laser cutting 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 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.

With a laser cutting business, you may find yourself facing the risk of assets like your equipment and any commercial space you use being used in a lawsuit. Business insurance will help protect against that.

Common Situations Business Insurance May Cover for a Laser Cutting Business

Example 1: While meeting with a client, they trip over some of your office equipment, causing physical injury. Your general liability policy should cover their medical bills.

Example 2: As part of your marketing strategy, you have applied to attend several conventions. These conventions require each participant to carry a minimum of $1 million of liability insurance. A general liability policy will help fulfill that requirement.

Example 3: While delivering trophies for your customer’s event, your employee loses control of a heavy handcart, breaking the trophies and damaging the venue’s floor. General liability insurance should cover the cost of legal representation and court-awarded damages for the lawsuits both the customer and the venue have brought against you.

Other Types of Coverage Laser Cutting 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 laser cutting businesses should obtain:

Product Liability Insurance

For business owners who manufacture, supply, or sell products, this is important coverage. If a client claims dissatisfaction or claims injury from your products, they can bring a legal suit against you. Product liability insurance ensures you are legally represented in court. Additionally, if the court rules in favor of the claimant, it will cover damages up to the limits of the policy.

Commercial Property Insurance

To protect your business-owned assets, you will need to discuss the importance of commercial property insurance with your agent. In the event of a covered loss, including fire and windstorm, this policy would repair or replace owned buildings, inventory, and equipment. Renters should review the terms of their lease to determine if they are responsible for any portion of the leased building, as many policies offer additional endorsements to ensure no gap in coverage.

Commercial property insurance is often written as part of a business owner’s policy (BOP).

Workers Compensation Insurance

This state-mandated policy is a requirement for all business owners with employees. It offers medical coverage and a percentage of lost wages for workers injured while on the job. If sued over the claim, the policy would also cover your legal representation costs.

Workers’ compensation insurance is generally purchased as a standalone 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 and commercial property insurance.

Read our Business Insurance for Laser Cutting Businesses article for more info.

Starting a laser cutting business can be quite expensive. This is because you will need to:

Purchase a laser system, work computer, and business software
Lease or purchase a garage or studio
Purchase business insurance
Hire labor (depending on the size of your laser cutting business)

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

Ongoing expenses will mainly include the cost of machine maintenance, utilities, and employee wages.

Learn more about running a laser cutting business.

Profit is generated through the sale of services to clients for laser-cut products based on the time and materials involved in the creation of the items.

Learn more about starting a laser cutting business.

Traditionally used in large-scale industrial applications, laser cutting businesses create new custom objects or tools and engrave objects for personal or professional use.

Since some clients may offer as much as several tens of thousands of dollars for certain projects, profit has the potential to be relatively high with the right customer base.

Learn more about starting a laser cutting business.