Should I Start an LLC for My Souvenir Shop?

Starting a limited liability company (LLC) for your souvenir shop 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 souvenir shop, lawsuits can arise from things like personal injury on your premises (either to a customer or an employee of your shop) or continually missing loan repayments.

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

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

Do I Need an LLC for a Souvenir Shop?

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 Souvenir Shop

By starting an LLC for your souvenir shop, 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.

Souvenir shops will benefit from liability protection because of the risk of being sued for personal injuries, product liability, copyright infringement, and libel.

Example 1: A customer slips and falls in your store. They file a lawsuit against you, claiming negligence on behalf of your business. In situations like this, liability protection will limit any potential legal damages to only your business assets, protecting your personal finances from any losses.

Example 2: You took out a loan to expand your souvenir shop but could not meet the payments due to some setbacks. As long as you did not guarantee the loan personally, an LLC will protect your personal assets.

Example 3: One of your employees injures themselves while working in the store. They become frustrated and file a compensation lawsuit for not providing them with proper safety equipment. If the court rules against you, liability protection will ensure the lawsuit damages do not affect your personal 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 Souvenir Shop

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 souvenir shop 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

Souvenir shops 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 limited liability protection from being an LLC protects your personal assets, not your business assets.

Souvenir shops need insurance to protect their stock, employees, and customers from potential losses. Insurance can also help cover costs in the event of legal action being taken against the shop.

Common Situations Business Insurance May Cover for a Souvenir Shop

Example 1: As a customer enters your restroom, he slips on wet flooring, breaks an arm, and decides to sue your business for damages. General liability insurance would pay for your legal defense and any required settlement.

Example 2: A local competitor sues your company for libel. While you disagree with the claim, you know you need an attorney. General liability insurance would cover your legal fees and any required settlement.

Example 3: While trying to reach an item on a high shelf, a customer slips, breaks an ankle, and asks you to pay for her medical treatment. General liability insurance would cover her medical expenses.

Other Types of Coverage Souvenir Shops 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 souvenir shops should obtain:

Product Liability Insurance

While you strive to sell souvenirs that make your customers happy, there’s always a chance someone might decide one of your products caused them injury. In the event of a lawsuit, product liability insurance would cover your legal fees and any required settlement.

Commercial Property Insurance

You made a major investment in your shop’s inventory, displays, furnishings, equipment, and other supplies. In the event of a fire, theft, or natural disaster, commercial property insurance would cover the cost of repairing or replacing your business-related property. This includes structural damage to your building and the business materials stored there.

Workers’ Compensation Insurance

If you have any employees, most states will require you to carry workers’ compensation insurance for your part-time and full-time workers. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover but also any disability or death benefits stemming from a workplace accident.

Commercial Umbrella Insurance

While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.

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, workers’ compensation insurance, and commercial property insurance.

Read our Business Insurance article for more info.

The startup costs for a souvenir shop depend on the location, size of the business, clientele, and nature of inventory. Still, you will need to set aside capital for a lease, labor costs, computer and cash register software, licensing and permits, and promotion and marketing.

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

Payroll, inventory, rent, and utilities are the primary ongoing costs.

Learn more about running a souvenir shop.

Souvenir shops sell various souvenirs at various attractions.

Learn more about starting a souvenir shop.

A souvenir shop sells merchandise that helps people remember visiting the area where your shop, cart, or kiosk is located. Your merchandise, location, and overhead costs will determine your profits.

Learn more about starting a souvenir shop.