Last Updated: May 10, 2024, 10:27 am by TRUiC Team

Should I Start an LLC for My Nail Salon?

Starting a limited liability company (LLC) for your nail salon 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 nail salon, lawsuits can arise from things like infections suffered by customers due to your business failing to properly sanitize tools or any injuries that happen in your salon.

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

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

Do I Need an LLC for a Nail Salon?

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 Nail Salon

By starting an LLC for your nail salon, 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.

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

Example 1: Your nail salon is sued by a vendor for a past due account. You had asked for a price reduction since some of the items delivered were damaged. Regardless, if the vendor’s suit is successful, payment can only be made from business assets. Your personal assets won’t be touched by the judgment. 

Example 2: Your nail salon cannot keep up with payments on a business card, and the card company takes you to court. Any judgment they obtain can only be directed to your business assets, your personal assets would be safe. 

Example 3: Mounting liabilities force you to close your nail salon leaving many vendors and suppliers unpaid. Some sue; but any judgments they obtain can only be satisfied from business assets. Your personal assets are protected by the limited liability shield of your LLC.

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 Nail Salon

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 nail salon 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

Nail salons 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).

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.

A nail salon needs liability insurance to provide protection against bodily injury to patrons which is an ever-present risk. General liability insurance also covers property damage, legal fees, and court awards.

Common Situations Business Insurance May Cover for a Nail Salon

Example 1: You have decided to sell your commercial building and move to a space that receives more foot traffic. The landlord of the new building you wish to rent requires all commercial tenants to carry at least $1 million of general liability insurance as part of the lease requirement. Having a general liability policy with the required limits would make you eligible to rent the space you’ve been looking at.

Example 2: The salon tech is cleaning the foot basin next to someone getting their nails done. They accidentally spill the cleaning agent, which splashes all over the client’s personal belongings, ruining their expensive handmade leather purse. A general liability insurance policy would cover payments that are owed to the customer to replace their personal belongings.

Example 3: Our front office employee mops up some water that a guest spilled. Per standard protocol, they place a sign in the area indicating the floor is wet and slippery. Despite warnings, another customer slips and falls and breaks her arm. A general liability policy would cover the medical bills stemming from such an accident.

Other Types of Coverage Nail Salons 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 nail salons should obtain.

Commercial Auto Insurance

Since you will be driving your business vehicle on public roadways, you are mandated by the state to carry a commercial auto policy. Auto insurance protects not only your vehicle but any liability you may have in an accident. Your personal car insurance will not cover you if you are driving the business vehicle, even if you are off duty.

Commercial Property Insurance

If you own your location instead of renting, you need commercial property insurance to protect the building. If your business is based out of your home, your homeowners' insurance will not cover the home when it is being used for commercial purposes. Property insurance also covers items owned by your business.

Nail salons invest heavily in the tools that are used to complete their work. Be sure that you have enough coverage to replace all of your tools in the case of a loss. This coverage is generally offered in a Business Owner Policy (BOP).

In addition to the policies outlined above, there are a few other types of coverage your nail salon may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.

Workers' Compensation Insurance

If your nail salon has any employees (full-time or part-time), you are legally required to carry workers’ compensation insurance. This type of coverage will help compensate your employees in the case that they get injured on the job.

Read more about workers’ compensation insurance.

Business Interruption Insurance

In the event of a fire, flood, or other catastrophes, there is a good chance your business operations will be halted for some time. Business interruption coverage is designed to help you recoup a portion of the revenue your business would lose due to the inability to operate.

This type of insurance is typically included in a business owner’s policy.

Commercial Umbrella Insurance

Umbrella coverage allows you to extend above and beyond the standard limits of your other business insurance policies. If you are faced with a large lawsuit or other claim situation, there’s a possibility that the coverage limits of your standard policies will be insufficient. In this case, your umbrella policy will allow you to surpass these limits.

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 Nail Salon Business Insurance article for more info.

A nail salon can be started on a low budget. The main capital cost will be the equipment, which will require an expenditure of a few hundred dollars to 10,000 or more. Monthly expenses will include rent, salaries, utilities, and commercial insurance.

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

The main expenses for a nail salon are rent for your space, equipment, and payroll. 

Learn more about running a nail salon.

Nail salons make money by providing nail services like manicures and selling nail-care products.

Learn more about starting a nail salon.

A single nail salon could bring in around $40,000 to $75,000 in profit. Nail businesses are easily scalable by hiring additional technicians or even opening more locations. This significantly increases the profit potential for this business.

Learn more about starting a nail salon.

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