Do I Need an LLC for My Screen Printing Business?

Starting a limited liability company (LLC) for your screen printing 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 screen printing business, lawsuits can arise from things like delivering shirts printed with an incorrect design to clients or delivering merchandise past the date agreed upon in a contract.

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

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

Should I Start an LLC for a Screen Printing 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 Screen Printing Business

By starting an LLC for your screen printing 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.

Screen printing businesses will benefit from liability protection because of the risk of trademark infringement, property damage, and general business risks.

Example 1: An employee of your screen printing business is injured while operating machinery and decides to seek financial compensation through legal action. Limited liability will ensure that your assets as the owner aren’t on the line, even if the business is found to be liable for the employee's injuries.

Example 2: Your business is sued by a customer looking for compensation, claiming that you gave them defective merchandise. Limited liability protection will ensure that your assets are not claimed, even if the business is found to be liable for the products.

Example 3: After your business suffers some financial setbacks, one of your suppliers sues you for nonpayment of goods and services. As an LLC, the limited liability will ensure that your personal assets are not at risk, even if the business is found to be liable for the unpaid debts.

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 Screen Printing 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 screen printing 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

Screen printing 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.

Insurance can help safeguard a screen printing business against financial losses from damages to printing equipment, injuries to employees or customers, errors or omissions in the printing process, and theft or vandalism of business property.

Common Situations Business Insurance May Cover for a Screen Printing Business

Example 1: One of your employees is transferring supplies from their vehicle into the inventory room using a metal pushcart. As they stop to prop open the door, they lose control of the cart, and it smashes into the luxury vehicle of a customer, causing extensive damage. Your general liability insurance policy will likely cover the cost of repairs and your legal fees if there is a lawsuit.

Example 2: While taking a tour of your production floor, a customer trips over an extension cord and falls into some of the machinery. They suffer serious injuries and threaten to sue. General liability insurance will likely cover the cost of their medical bills. Additionally, your policy will likely pay for your legal fees and any awarded damages or settlements in a lawsuit.

Example 3: A customer has arranged to pick up an order before the shop opens. The customer enters the building while your cleaning crew is still at work and slips on the wet entrance floor. They hit their head in the fall and break their wrist. General liability insurance will likely pay for their medical expenses and any other damages associated with a possible lawsuit.

Other Types of Coverage Screen Printing 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 screen printing businesses should obtain:

Workers’ Compensation Insurance

Workers’ compensation insurance is designed to cover your employees in the event of a workplace accident. This coverage is typically required by state law and helps to cover medical bills, disability benefits, and, in severe cases, even death benefits related to workplace injuries.

Product Liability Insurance

If you produce an item that is found to be defective or otherwise causes harm to your customers, you can be held liable for any related damages. With product liability coverage, you can protect your business in the event of a lawsuit and rest easy knowing that legal fees and any awarded settlements will be covered by your insurance policy.

Commercial Auto Insurance

Whether your company has a small fleet of delivery vans or you use your private vehicles for business duties, you should invest in commercial auto insurance. Keep in mind that your personal car insurance policy will not protect you or your employees in the event of a work-related accident on the road.

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 Screen Printing Business Insurance article for more info.

Starting a screen printing business typically involves purchasing specialized printers and supplies, as well as investing in a professional website and traditional advertising. The cost of specialized printers can be around $10,000, while supplies, such as shirts to print on, can be under $5,000.

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

The ongoing expenses of running a screen printing business include materials and supplies, equipment maintenance, marketing, and insurance.

Learn more about running a screen printing business.

Screen printing businesses make money by charging a fee for printing services.

Learn more about starting a screen printing business.

Screen printing businesses print images on T-shirts and non-paper materials. Most screen printing businesses offer custom designs, but some also provide generic designs and templates for customers to use.

The average profit margin for a screen printing business needs to be at least 20% to be sustainable. Some established screen printing businesses can see profit margins as high as 45%.

Learn more about starting a screen printing business.