Should I Start an LLC for My Sporting Goods Store?

Starting a limited liability company (LLC) for your sporting goods 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 sporting goods store, lawsuits can arise from things like product liability (i.e. defective sporting goods sold to a customer), discrimination (i.e. by customers who feel they were treated unfairly), and personal injuries that occur on its premises.

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

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

An assortment of balls and sports equipment

Do I Need an LLC for a Sporting Goods 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 Sporting Goods Store

By starting an LLC for your sporting goods 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.

Sporting goods stores will benefit from liability protection because of risks associated with guests and employees visiting or working on your business premises, product liability, and trademark infringement claims.

Example 1: You sell a defective product to a customer, and they suffer an injury as a result. After filing a lawsuit, the court finds your business liable for damages. With LLC protection, your personal assets will be shielded from being used to pay compensation to the customer.

Example 2: A group of athletes visits your store to buy some sports gear. The cashier is rude and refuses to serve them. The group files a lawsuit against the store, claiming discrimination. If found liable, only the business assets will be affected by the lawsuit.

Example 3: A customer slips and falls in your store while trying out a pair of shoes. They are rushed to the hospital and diagnosed with a severe injury. If the customer decides to sue, your LLC may be liable to pay compensation, but your assets will be safe from the case.

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 Sporting Goods 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 sporting goods 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

Sporting goods 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 limited liability protection from being an LLC protects your personal assets, not your business assets.

Sporting goods stores require insurance to protect their business from the financial losses that may arise due to unexpected events. This includes liability coverage for potential lawsuits related to customer injuries, damage to property caused by products sold at the store, and any other liabilities unique to the business.

Common Situations Business Insurance May Cover for a Sporting Goods Store

Example 1: While playing with a ball in your store, a child trips over a box and breaks a wrist. General liability insurance would cover the child’s medical bills.

Example 2: As a customer tries out a treadmill in your store, it malfunctions and suddenly speeds up. In the resulting fall, the customer breaks a collarbone, suffers a concussion and decides to sue. General liability insurance would cover the customer’s medical bills as well as your legal fees and any damages awarded in a settlement.

Example 3: Your latest marketing campaign boosts sales, but part of its messaging upsets a competitor and leads to a libel lawsuit. General liability insurance would pay your legal fees and any damages awarded in a settlement.

Other Types of Coverage Sporting Goods Stores 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 sporting goods stores should obtain:

Workers’ Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. 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 benefits stemming from a work-related accident.

Commercial Property Insurance

You make major investments to maintain a broad inventory of sporting goods. If you own the building in which you operate, you’re responsible for all business-related property housed there in the event of a fire or other natural disaster. Commercial property insurance would cover the cost of replacing your inventory and other business equipment after an accident so you can recover quickly.

Product Liability Insurance

While your high-quality products are generally safe if used properly, there’s always a chance a customer may file a lawsuit if they believe one of your products harmed them. Product liability insurance would protect your business by covering your legal fees and any damages awarded in the event of a lawsuit.

Commercial Auto Insurance

Every vehicle you drive for business purposes requires commercial auto coverage. If you use personal vehicles for work duties, your personal car insurance won’t pay for damages to your car or medical treatment for anyone injured in a work-related accident. Commercial auto insurance protects all vehicles you use on-the-job in the event of an accident.

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 for Sporting Goods Stores article for more info.

To start a sporting goods store, you will need to either rent a retail space or create a website for your business. You’ll also need to budget for a computer, high-speed internet, business license and insurance, employee wages, utilities, and initial inventory.

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

Ongoing costs will include rent, utilities, employees’ wages, and the cost of sporting goods inventory.

Learn more about running a sporting goods store.

Profit is made by selling sports-related equipment and materials to customers that visit your business location or make purchases online.

Learn more about starting a sporting goods store.

Sporting goods stores sell equipment and supplies for a variety of sports activities. Some stores also offer repair and maintenance services.

Sporting goods stores widely vary in the product selections they offer to customers. The larger the product selection, the higher the potential profit your store will have.

Learn more about starting a sporting goods store.