Should I Start an LLC for My Sign Business?

Starting a limited liability company (LLC) for your sign 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 sign business, lawsuits can arise from things like property damage caused by your workers while installing a signpost, libel accusations from competitors, and defaulting on debt.

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

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

Do I Need an LLC for a Sign 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 Sign Business

By starting an LLC for your sign 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.

Sign businesses will benefit from liability protection because of the risk of property damage, personal injury, theft, and equipment damage.

Example 1: One of your workers causes property damage while installing a signpost. The property owners have filed a lawsuit requesting you pay for damages. If the court orders you to pay for damages, limited liability protection will ensure you don't pay through your personal assets.

Example 2: One of your competitors in the sign industry has filed a libel lawsuit against your company, claiming your recent marketing campaign made false claims about their company. If you have limited liability protection, your personal assets will be shielded from the financial fallout of the lawsuit.

Example 3: You took out a loan to finance your sign business but could not repay due to some business difficulties. Following this, your lenders have resorted to legal action to retrieve their money. In this scenario, liability protection will protect your personal assets from being used to pay for the loan, 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 Sign 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 sign 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

Sign 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.

Sign businesses need business insurance to protect them from property damage, liability claims, legal fees, and unavoidable events that could bankrupt the business.

Common Situations Business Insurance May Cover for a Sign Business

Example 1: You are installing a sign at the business of a client when you drop some equipment on his luxury sedan, knocking a hole in the roof of the vehicle. Your general liability insurance policy covers damage to customer property. It will pay for repairs to the vehicle.

Example 2: One of your employees is pulling a sign out of the truck when he knocks your client to the ground. She breaks her arm and sues your business. The general liability insurance policy you have will pay for your legal defense costs, including hiring a lawyer.

Example 3: A competing sign business sues your company for libel. Your general liability insurance policy will cover your legal fees when defending against libel lawsuits. It will pay for your lawyer and for a settlement if needed.

Other Types of Coverage Sign 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 sign businesses should obtain:

Product Liability Insurance

You work hard to produce signs that will satisfy your clients, but you know that it is always possible that a client could sue you over your product regardless of your hard work. If they sue you for injuries, they say your product caused, product liability insurance will pay your legal defense costs.

Workers’ Compensation Insurance

The employees who help you with your sign work need the coverage that comes with workers’ compensation insurance. If they get hurt performing their job duties, the policy will pay for their medical treatment. If they need to avoid working for a while to heal, the policy will help pay for their lost wages.

Commercial Auto Insurance

If you have a vehicle that you use for your sign business, you are likely required by law to have commercial auto insurance. The policy will pay to repair damages to your vehicle after an accident, as well as for medical care for occupants who get injured. It will also protect you from liability if you or an employee are at fault for the accident.

Commercial Umbrella Insurance

An umbrella policy will start paying if you exceed the limits of your general liability insurance policy, which can happen if you lose a big lawsuit. The umbrella policy will kick in when the general liability insurance policy runs out so you do not have to pay the remaining damages out of pocket.

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 workers' compensation insurance.

Read our Sign Business Insurance article for more info.

Establishing a sign business requires about $5,000 initial investment. This is because you can start the business from your home, eliminating the cost of renting a space. The $5,000 investment will cover the cost of a sign plotter, computer, graphic design, software, insurance, marketing materials, and website.

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

Ongoing expenses of running a sign business include utilities, signage-making materials, equipment maintenance, marketing, and insurance.

Learn more about running a sign business.

Sign businesses make money by charging a fee for the time and materials used to produce signs for their customers.

Learn more about starting a sign business.

Sign businesses manufacture and sell signs to the public, mostly to other businesses.

Profit margins for sign businesses range from 50% to 95%. As other businesses open and grow, they need sign businesses to help them create signage to stay competitive.

Learn more about starting a sign business.