Should I Start an LLC for My Sunglasses Line?

Starting a limited liability company (LLC) for your sunglasses 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 sunglasses line, lawsuits can arise from things like an inability to repay a creditor what your business owes, the wrongful dismissal of an employee, or selling the design of a popular brand as your own.

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

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

Do I Need an LLC for a Sunglasses Line?

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 Sunglasses Line

By starting an LLC for your sunglasses 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.

Sunglasses lines will benefit from liability protection because of the risk of product liability, trademark infringement, financial data breaches, and workplace accidents.

Example 1: In order to help get your sunglasses line off the ground, you decide to take out a large loan to inject some initial capital into it. However, as a result of an unforeseeable recession, your business is unable to earn enough profit to make repayments on time. This motivates the creditor to sue your business for defaulting on this debt. In the lawsuit that follows, limited liability precludes the court from pursuing your personal assets in order to satisfy business liabilities.

Example 2: Without your knowledge, an employee designs and sells knockoff sunglasses that are identical to those of a popular brand. This soon leads to your business receiving notice of a copyright infringement lawsuit being filed against it by this brand. Limited liability prevents you from being held personally liable for any obligation the court may impose on the business.

Example 3: After having a huge argument with an employee of your sunglasses line, you decide to fire him without any good reason because he has annoyed you. Feeling that he had been let go in a way that goes against his contract, the employee filed a wrongful dismissal lawsuit against your business. In the event that the court awards damages to the plaintiff, it can only look to your business’s assets in order to satisfy this debt.

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 Sunglasses 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 sunglasses 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

Sunglasses 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 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.

Moreover, insurance is beneficial for a sunglasses line as it protects it from financial losses due to unexpected events or circumstances, such as accidents or lawsuits. This is invaluable in minimizing the impact of these potential losses on the financial stability and viability of your sunglasses line.

Common Situations Business Insurance May Cover for a Sunglasses Line

Example 1: As you load merchandise onto a truck, a passerby trips over one of your boxes, injures himself in the resulting fall, and sues you for $150,000 to cover his medical expenses and additional damages. General liability insurance would pay for his medical treatment and any court-awarded damages.

Example 2: In order to rent a new building for your business, the landlord requires evidence of $1 million in liability insurance. A general liability policy would fulfill this requirement of the lease agreement.

Example 3: A competitor sues your company, claiming he lost business because the slogan in your new marketing campaign closely resembles his company slogan. General liability insurance would cover your legal representation and any awarded damages.

Example 4: When an employee leaves the coffee maker on overnight, it causes a fire, and your landlord sues you for $300,000 in property damages. General liability insurance would cover the cost of repairing the damaged property.

Other Types of Coverage Sunglasses 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 sunglasses lines should obtain.

Commercial Property Insurance

You made a major investment in the equipment, supplies, and real estate needed to establish your business. 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

Most states require businesses to carry workers’ compensation insurance for their 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. In the event of a lawsuit, it also covers your legal fees and any court-awarded damages.

Product Liability Insurance

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

Business Interruption Insurance

If you need to close your business temporarily after a fire, severe storm, or other covered events, it could take weeks, months, or even years to complete the necessary repairs. Business interruption insurance helps cover your expenses and lost revenue until you can reopen. Many policies also offer extra expense coverage, which can help you set up a temporary location while you make repairs to your facility.

Commercial Auto Insurance

Any vehicle you use primarily for your business requires commercial auto insurance to protect the vehicle, driver, and others on the road in the event of an accident. Be sure to select a policy that covers not only accident-related vehicle repair costs and medical treatment for anyone injured but also sufficient protection for any equipment you carry in your vehicle.

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.

Read our Sunglasses Line Business Insurance article for more info.

The amount of capital required to launch your sunglasses line will largely depend on the materials you decide to select for it. Naturally, the higher cost of luxury materials will increase the price. What’s more, a basic website may be appealing cost-wise, but it is often recommended to invest in a professional design to appeal to wealthier customers.

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

Some of the main operating expenses for a sunglasses line are production costs, payroll, and raw materials.

Learn more about running a sunglasses line.

Sunglasses lines make money by selling sunglasses to customers. This could be in physical retail stores or online.

Learn more about starting a sunglasses line.

Sunglasses lines can focus on making high-end sunglasses, or they can try to reach the masses with a lower-priced product. Either of these could be a successful business model if the line can distinguish itself from the competition.

Designer sunglasses can be sold for $400 or more, while more economical sunglasses can be priced at around $30.

Learn more about starting a sunglasses line.