Should I Start an LLC for My Shoe Line?

Starting a limited liability company (LLC) for your shoe line 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 shoe line, lawsuits can arise from things like claims that your business falsely advertised the true quality of its shoes, or knowingly selling shoes with defects in their design.

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

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

Do I Need an LLC for a Shoe Line?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form 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 Shoe Line

By starting an LLC for your shoe line, 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.

Shoe lines will benefit from liability protection because of the risk of being sued for things like workplace accidents, trademark infringement, and libel. 

Example 1: You took out a loan to expand your shoe line but could not repay the loan on time because of some business setbacks. If you have an LLC, your creditors will not have access to your private assets when they come for their money, provided you didn't guarantee the loan personally.

Example 2: A former employee has claimed that his dismissal from your business was unwarranted and has filed a lawsuit against your company. In the event the court finds you in the wrong, liability protection will confine the effect of the incident to only your business assets.

Example 3: A competitor has filed a lawsuit against your firm on the grounds that your logo violates their intellectual property. If the court finds you guilty and charges you to pay for damages, limited liability will ensure you do not pay through your private assets.

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 Shoe Line

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 shoe line 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

Shoe lines 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).

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.

Shoe lines need insurance for financial security and to protect their assets against lawsuits, theft, permanent damage, and natural disasters.

Common Situations Business Insurance May Cover for a Shoe Line

Example 1: You are showing an investor around your facility when she trips over a cable and falls, breaking her arm. She demands that you pay for her medical care. Your general liability insurance policy will likely pay for her treatment if you file a claim.

Example 2: A competing shoe line has sued your business for libel. Your general liability insurance policy covers legal defense fees when someone accuses your business of libel. It will pay for your lawyer and for a settlement if one is necessary.

Example 3: An employee is bringing in a large box of product from the back when he knocks over a visitor to your business. The visitor breaks his arm and sues your company. Your general liability insurance policy will pay your legal defense costs, including the cost of hiring an attorney.

Other Types of Coverage Shoe Lines 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 shoe lines should obtain:

Commercial Property Insurance

You invested a large amount of capital in the equipment, supplies, inventory, and other items you use to run your business. If you were to lose your property in an unexpected event like a fire, it would be difficult to replace. Commercial property insurance can help in such circumstances. It will help pay for the replacement of property lost in events covered by the policy.

Workers’ Compensation Insurance

The employees you have at your shoe line need the coverage that comes with workers’ compensation insurance. If they get injured performing their job-related tasks, the policy will pay for their medical treatment. If they are unable to work for a time due to the injuries, the policy will help pay their lost wages.

Product Liability Insurance

You want your shoe line to make your customers happy and satisfied with their purchases. However, there is always a chance that a customer could decide that your product caused them injury and sue your business over it. A product liability policy will pay your legal defense costs in these circumstances. It will pay for your lawyer and for a settlement if necessary.

Commercial Umbrella Insurance

A commercial umbrella insurance policy will pick up where your general liability insurance policy leaves off. If you exceed the limits of your general liability policy, such as if you were to lose a big lawsuit, the umbrella policy would kick in and start paying. It will help you avoid paying damages out of pocket.

Should I Start an LLC FAQ

Which is better for my shoe line — an LLC or sole proprietorship?

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.

What type of insurance does a shoe line need?

At a minimum, you’ll need general liability insurance.

Read our Business Insurance for Shoe Lines article for more info.

What are the costs to start and maintain a shoe line?

Establishing a shoe line can be expensive, especially if you launch in a crowded market where rent, utilities, and supplies are pricey. Industry experts recommend setting aside at least $200,000 for your venture. But this is just an estimate as the actual value can go higher or lower, subject to your scale and location.

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

What are the ongoing expenses of running a shoe line?

Ongoing expenses will include materials/inventory, production charges, retail space or distribution expenses, marketing, and any employee salaries.

Learn more about running a shoe line.

How do shoe lines make money?

Shoe lines make a profit on each item sold. Profit in a shoe line business is determined by the market price for your product minus your cost of materials and other expenses.

Learn more about starting a shoe line.

What is a shoe line and is it profitable?

A dedicated shoe line provides footwear for consumers. While many shoe designers focus primarily on higher-end products, some also offer their wares in chain stores such as Target.

The average profit margin for a shoe line will be around 40% depending on the price point and the materials used to create the line. 

Learn more about starting a shoe line.

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