Last Updated: February 16, 2024, 1:44 pm by TRUiC Team

Should I Start an LLC for My Makeup Business?

Starting a limited liability company (LLC) for your makeup 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 makeup business, lawsuits can arise from things like adverse health effects suffered by customers as a result of using your products or false claims that a product is “non-comedogenic.”

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

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

Do I Need an LLC for a Makeup 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 Makeup Business

By starting an LLC for your makeup 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.

Makeup businesses will benefit from liability protection because of the risk involved with selling products that customers apply to their skin. There is always the possibility that a customer has an allergic reaction to your products and sues your business. Even if the ingredients were clearly marked, legal defense costs could be substantial.

Additionally, almost every business faces risks like financial data breaches, trademark infringement claims, and workplace accidents.

Example 1: After launching a new line of skincare products, several customers file a class-action lawsuit against you. They claim that certain chemicals in these products caused them to develop a rare type of skin cancer.  If your company is found guilty, any compensation for the lawsuit will only be covered by the business's assets and not your personal assets.

Example 2: A client places an order with your company to resupply talc products to retail in her salon. A few weeks later, she receives complaints from her customers about severe irritation and chemical burns, most likely caused by your product. If she sues your business,  your personal assets will be protected from the financial fallout of the lawsuit.

Example 3: Your makeup business is invited to sponsor a beauty pageant in your local high school. The teenagers excitedly receive the skin creams you give them. A few months later, acne eruptions and skin infection breakouts cause you to be summoned by the school board, and charges are filed. Liability protection will ensure your personal assets are not affected by any fees or compensation associated with the lawsuit.

Example 4: A client tries one of your new products and it causes an adverse reaction that requires medical care. They sue you to cover 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 Makeup 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 makeup 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

Makeup 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.

Northwest will start an LLC for you for just $29 (plus state fees).

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.

Makeup businesses need insurance to protect their financial accounts from lawsuits arising from bodily injury, cosmetic damage, and allergic reactions, which can be commonplace in the beauty industry.

Common Situations Business Insurance May Cover for a Makeup Business

Example 1: A customer visiting your place of business slips on a wet floor and falls, breaking her wrist. She decides to take legal action against your business, claiming that you did not warn her of the danger posed by the wet floor. With a general liability insurance policy, you can expect your legal defense to be paid for by your insurer.

Example 2: One of your employees is hauling a hand cart stacked high with boxes of your products through your parking lot. He loses control of the hand cart and runs into the luxury automobile of one of your top clients, scratching the paint and causing a small dent. Your general liability insurance policy would likely cover the costs of repairing the automobile.

Example 3: After a meeting with potential clients, one of the visitors to your business takes a wrong turn from the office and enters the manufacturing area. He trips over a pallet and falls, sustaining a concussion and a broken arm. He sues your business in an attempt to hold you responsible for his injuries. The general liability insurance you carry will pay for your legal costs, including any payout or settlement.

Other Types of Coverage Makeup 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 makeup businesses should obtain:

Workers’ Compensation Insurance

All businesses with employees need workers’ compensation insurance to protect both the business and the employees. A workers’ compensation policy is required by law in most states for companies with employees. With a workers’ comp policy, your employees will have their medical bills paid for when treating work-related injuries. It will also pay for missed wages due to work-related injuries.

Product Liability Insurance

If a customer decides that one of your makeup products caused an injury or allergic reaction, she may decide to take legal action and demand compensation. In the event that you are facing such a lawsuit, your product liability insurance will provide financial backup—paying for your legal defense and for any payouts or settlements related to the lawsuit.

Commercial Umbrella Insurance

Every general liability insurance policy has limits. Once those limits are reached, you are left to pick up the tab to cover any additional expenses. With a commercial umbrella policy, you have extra protection beyond your general liability insurance limits. Once the limits of your general liability policy are met—like in the event of losing a costly lawsuit—then your umbrella policy will begin to pay until its limits are reached.

Business Interruption Insurance

Sometimes disaster can strike and leave you unable to keep your business operating—but usually, the expenses don’t stop. A business interruption insurance policy is designed to help cover lost profits if your business shuts down due to a covered event. A business interruption insurance policy is often offered with a comprehensive business owner’s 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 product liability insurance.

Read our Makeup Business Insurance article for more info.

Starting a makeup business requires a large investment of both time and money. You’ll need to factor in the costs of storefront or factory locations, makeup accessories, and other business management systems. Other costs like website, advertising, and payroll bring startup costs within the range of $75,000 to $200,000.

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

Some of the main ongoing expenses for a makeup business are payroll, rent, marketing, and inventory.

Learn more about running a makeup business.

Makeup businesses make money by selling their makeup to either wholesale or retail customers. Some makeup companies also expand to sell beauty tools or even skin care products.

Learn more about starting a makeup business.

There are several ways to structure a makeup business. You could sell your makeup to distributors, have your own storefront, or even try to sell online.

Starting a makeup business requires significant investment and time. But if you can afford the startup costs, profits could be very high. Profit margins for successful makeup businesses can average between 40% and 80%.

Learn more about starting a makeup business.

Related Articles

Article Sources

IRS: Limited Liability Company

IRS: S Corporations


SBA: Small Business Guide

SBA: Choose a Business Structure Guide

US Census Bureau: Small Business Statistics

SBA Office of Advocacy: Data on Small Business

FRED: SBA Data for Small Business