Should I Start an LLC for My Shoe Store?

Starting a limited liability company (LLC) for your shoe 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 shoe store, lawsuits can arise from things like selling a pair of shoes with a defect to a customer (who later suffered injuries as a result) or defaulting on a business loan.

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

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

Do I Need an LLC for a Shoe 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 Shoe Store

By starting an LLC for your shoe 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.

Shoe stores will benefit from liability protection because of the risks that come along with operating a retail store, such as product liability, workplace accidents, and financial data breaches.

Example 1: A competitor has sued your company, claiming that your logo infringes on their trademarked design. Liability insurance will offer protection for your personal assets if you are found liable in court.

Example 2: An ex-employee has sued your business on the grounds that his layoff was unjustified. Liability protection will limit the impact of the incident to your business assets in the event you’re found liable.

Example 3: You took out a loan to build your shoe store business, but you ran into financial difficulties and are unable to repay the debt. If you have an LLC, your personal assets will be safe from creditors, provided you didn't guarantee the loan personally.

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 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 shoe 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

Shoe 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.

Shoe stores need insurance to prevent their assets and supplies from being permanently damaged or lost, thereby providing financial stability for the business.

Common Situations Business Insurance May Cover for a Shoe Store

Example 1: On a rainy day, a customer slips on your shoe store’s floor and bumps their head in the fall. The bump results in a concussion and requires a ride to the hospital. General liability insurance would likely cover any medical bills or legal costs associated with the incident.

Example 2: A Black Friday sale draws in lots of customers, and they rush through the doors when your shoe store opens. In the jostling, one customer is unintentionally pushed to the ground and trampled by others. They have multiple injuries that require medical care. General liability insurance would probably cover care that’s needed.

Example 3: While a customer is trying on a pair of stilettos, the heel brakes and they fall. They sustain a sprained ankle and fractured wrist in the fall. General liability insurance would probably cover any lawsuit associated with the fall and necessary medical treatment.

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 stores should obtain:

Commercial Property Insurance

If your shoe store owns the space it’s in, you probably need commercial property insurance for the building. In addition to insuring buildings, commercial property insurance can also protect equipment that’s kept on your store’s property.

Commercial property insurance is often included in a business owner’s policy (BOP).

Workers’ Compensation Insurance

As long as your shoe store has employees, you probably have to protect those employees with workers’ compensation insurance. Workers’ compensation insures against on-the-job injuries, and most states require businesses that employ people to carry it.

Product Liability Insurance

Businesses are sometimes held financially responsible for damage and/or injuries that occur if their products fail. Product liability insurance protects against product-related risks like these.

Even though the risk exposure for a shoe store may be minimal, this is still a good coverage to consider. When a product does fail, customers sometimes sue any business that handled the product—including the manufacturer, wholesaler, retailer, and others. Your business doesn't have to be at fault to be named in a lawsuit and face expensive legal costs.

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, commercial property insurance, and workers’ compensation insurance.

Read our Shoe Store Insurance article for more info.

Establishing a shoe store requires a substantial initial investment — about $200,000. This covers the franchise fee, marketing, renting a space, and insurance. The cost is subject to increase or decrease depending on the location you choose for the business.

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

Shoe store operating costs include rent, payroll, inventory, and insurance.

Learn more about running a shoe store.

Shoe stores make money by selling shoes to customers. Some shoe stores also sell socks and other apparel.

Learn more about starting a shoe store.

Shoe stores can potentially be very profitable, with a return on investment (ROI) of around 46%. Because of differences in sizes and styles, shoes are one item people often like to try on in person before buying.