Should I Start an LLC for My Liquor Store?

Starting a limited liability company (LLC) for your liquor 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 liquor store, lawsuits can arise from things like customers injuring themselves after falling over spilled liquor and a failure to obtain the necessary licenses to sell liquor in your city.

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

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

Do I Need an LLC for a Liquor 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 Liquor Store

By starting an LLC for your liquor 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.

Liquor stores will benefit from liability protection because of the risk of product liability, workplace accidents, and financial data breaches.

Example 1: An employee working in your store accidentally knocks over a few bottles of liquor, which break and spill all over the floor. A customer slips and falls on the spilled liquor, resulting in injuries. If the customer decides to sue for medical costs, lost wages, or other damages, the lawsuit will only affect your business assets.

Example 2: You hire a delivery person to bring liquor to an event at a hotel. While driving on the way, they have a car accident which causes significant damage to the products. If the customer decides to sue for damages, the lawsuit will only affect your store’s assets and will not affect your personal savings or other property.

Example 3: You have a contract to sell an entire shipment of liquor to a large party, but on the day of the event, you discover that your delivery truck has broken down. If your clients decide to sue for damages or loss, the lawsuit will only affect your business assets as an LLC.

Example 4: An improperly installed shelf breaks, causing a heavy bottle of liquor to fall and hit a customer. The customer asks you to cover their resulting 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 Liquor 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 liquor 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

Liquor 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.

Liquor stores are responsible for storing and selling an array of alcoholic beverages, and as with any business that involves money, there is a risk of theft or damage to property. Liquor stores need insurance to protect their products, buildings, and employees. Insurance can help cover the costs of any loss due to burglary, lawsuits, or fire, as well as losses caused by employee dishonesty or fraud.

Common Situations Business Insurance May Cover for a Liquor Store

Example 1: In your liquor store, a customer is standing beneath an unstable shelving unit. The shelf begins to tilt downwards, and a large glass bottle of liquor slides off and hits the customer in the head, causing a serious concussion. The customer brings your business to court, claiming that he suffers intermittent dizziness and stomach discomfort on a daily basis since the injury. If liable for this outcome, general liability insurance would probably be able to cover any resulting court payments or settlements to the customer.

Example 2: An elderly customer is attempting to pull a six-pack of bottled beer from your refrigerator unit. She struggles to remove it from a lower shelf, throwing out her back and dropping the beer on her foot. She decides to bring your business to court and argues that the injury interrupted her small gardening business for the rest of the summer. If found liable, your liquor store business would probably be covered for a settlement or damage estimate by the court.

Example 3: You decide to attract more attention to your storefront by installing a large neon sign above your doors, visible from the street nearby. A driver who routinely passes by your store is distracted by the bright new sign. He veers into the oncoming lane, clipping another speeding car in a near head-on collision. Both vehicles are very badly scraped with smashed front corners where they contacted. If found liable for your distracting sign, general liability insurance would likely cover what you owe in a lawsuit targeting your business.

Other Types of Coverage Liquor 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 liquor stores should obtain:

Liquor Liability Insurance

A wise plan for operating a liquor business always includes this policy. Liquor stores accrue revenue primarily through the sale of intoxicating substances, and that means potential liability. Liquor liability policies cover claims of injury or property damage resulting from alcohol consumption. Almost any damaging action performed due to alcohol consumption can be covered, including car accidents caused by drunk drivers, physical assaults by intoxicated customers, and accidental self-injuries sustained while drinking alcohol purchased from your business.

Commercial Property Insurance

In the liquor business, success depends on product sales. With the vast majority of your profits coming directly from these sales rather than services performed, it is essential that all storefronts in your business receive inventory coverage. Due to flammable inventory, fires are particularly devastating to a liquor business. Commercial property insurance covers fires and similar disasters, like violent storms and water damage from exploded pipes.

Crime Insurance

Liquor stores typically run well with slim staffing and a low customer presence. The problem is that with few people around, a staff member can easily access store inventory illegally, as well as any on-site cash on the premises. Handling a store safe is probably best left to you as the business owner. However, if this is not always feasible, you may decide to grant access to a trusted, longtime employee. Unfortunately, the psychology behind the theft is often complex, and even a reliable employee may feel as though they are compelled to steal your cash if they are in a tough situation.

Between this and your valuable inventory, it is possible for an employee to make off with thousands of dollars of cash and inventory. Crime insurance can be a wise choice for business owners with reasonable concerns about leaving their assets in the hands of workers.

Workers’ Compensation Insurance

Most liquor stores are operated by a small group of employees whose shifts switch off once or twice over the course of business hours. If your business has employees, you’ll likely need workers’ compensation insurance policy to cover claims from work-related accidents. Broken glass from bottles, stocking ladder accidents, and even robberies during store hours can create opportunities for worker compensation claims to arise. With this policy, both your employees and your business are protected from unfortunate financial losses resulting from on-site mishaps.

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 article for more info.

The startup costs for a liquor store depend on several factors, including location, inventory, staffing costs, and licensing fees. Franchises like Bevmax require a minimum of $150,000 investment capital for a franchise location, while larger establishments might need investments of up to $1 million.

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

Operating expenses for a liquor store include inventory, payroll, rent, and insurance.

Learn more about running a liquor store.

Liquor stores make money by selling alcohol to customers.

Learn more about starting a liquor store.

On average, liquor stores have one of the lowest profit margins of any business, but that doesn’t mean they can’t be successful.

The sale of alcoholic beverages is a huge market. Despite this, it can be challenging to make a large profit owning a liquor store due to high competition and low profit margins. However, if you can stand out from the crowd, your liquor store could turn into a successful business. Offering unique products or services could be one way to boost your business.

Learn more about starting a liquor store.