Should I Start an LLC for My Tattoo Parlor?
Starting a limited liability company (LLC) for your tattoo parlor 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 tattoo parlor, lawsuits can arise from things like customers suffering infections due to artists not cleaning their equipment, artists not following instructions, or discrimination.
LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your tattoo parlor seem more credible.
Interested in getting started? More than 84% of our readers form their LLC through a specialized LLC formation service in order to save time and avoid potential penalties.
Tailor Brands ($0 + State Fees)
Do I Need an LLC for a Tattoo Parlor?
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 Tattoo Parlor
By starting an LLC for your tattoo parlor, 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.
Tattoo parlors will benefit from liability protection because of the risk they face of trademark infringement, workplace accidents, and even personal injury to customers.
Example 1: After an employee at your tattoo parlor failed to adequately sterilize the equipment, a customer contracted a serious infection after receiving a tattoo. This prompted him to sue your business for its negligence. In this example, your personal assets would be protected from any business requirement to pay damages by limited liability.
Example 2: A customer was unhappy with the final result of their tattoo and so decided to file a lawsuit against your business on the basis that it did not follow their instructions for the artwork. In the ensuing litigation, your business’s liability to pay damages is prevented from extending to your personal assets by limited liability.
Example 3: A client alleges that an artist at your tattoo parlor refused to tattoo a religious symbol as a result of her faith and thus filed a discrimination lawsuit against your business. Limited liability ensures that the court cannot pursue your personal assets in an effort to satisfy any business obligation to pay the plaintiff damages.
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 Tattoo Parlor
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 tattoo parlor 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
Tattoo parlors 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.
Launch Your LLC With Tailor Brands
More than 84% of our readers form their LLC through a specialized LLC formation service like Tailor Brands in order to save time and avoid potential penalties.
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
- Alabama LLC
- Alaska LLC
- Arizona LLC
- Arkansas LLC
- California LLC
- Colorado LLC
- Connecticut LLC
- Delaware LLC
- Florida LLC
- Georgia LLC
- Hawaii LLC
- Idaho LLC
- Illinois LLC
- Indiana LLC
- Iowa LLC
- Kansas LLC
- Kentucky LLC
- Louisiana LLC
- Maine LLC
- Maryland LLC
- Massachusetts LLC
- Michigan LLC
- Minnesota LLC
- Mississippi LLC
- Missouri LLC
- Montana LLC
- Nebraska LLC
- Nevada LLC
- New Hampshire LLC
- New Jersey LLC
- New Mexico LLC
- New York LLC
- North Carolina LLC
- North Dakota LLC
- Ohio LLC
- Oklahoma LLC
- Oregon LLC
- Pennsylvania LLC
- Rhode Island LLC
- South Carolina LLC
- South Dakota LLC
- Tennessee LLC
- Texas LLC
- Utah LLC
- Vermont LLC
- Virginia LLC
- Washington LLC
- Washington D.C. LLC
- West Virginia LLC
- Wisconsin LLC
- Wyoming LLC
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.
Due to the array of liabilities faced by tattoo parlors, the benefit of insurance to these businesses cannot be understated. If any unexpected events causing financial loss to the business occur (such as a lawsuit, property damages, or theft), the business remains protected by insurance.
Common Situations Business Insurance May Cover for a Tattoo Parlor
Example 1: One of your clients suffers an ear infection after getting a piercing at your tattoo parlor. The ear infection gets worse over time and causes the individual to lose hearing partially in that ear. Before the problem is diagnosed, the individual runs up bills to his doctors in the tens of thousands of dollars. General liability insurance will probably pay any legal fees or settlements that are due to this person because of the incident.
Example 2: A customer trips and falls over a misplaced box of supplies, suffering an injury on site. After not being able to work for a month and accumulating substantial medical bills, they decide to sue the tattoo parlor. General liability insurance will protect the business from the numerous expenses that could come from this situation.
Other Types of Coverage Tattoo Parlors 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 tattoo parlors should obtain.
Workers’ Compensation Insurance
Workers at a tattoo parlor are constantly around sharp tools and dangerous blades, increasing the chances of a workplace injury. Workers’ compensation covers any illness or injury that may occur as a result of working on-site. Most states require businesses that employ part-time or full-time workers to carry workers’ compensation insurance. Keep in mind that this type of policy does not cover contractors, only employees.
Commercial Auto Insurance
If you have vehicles that are used for business, then you need the protection of a commercial auto insurance plan. This will protect against damage that occurs to the company vehicle while an employee is driving it as well as damage to other property. This is an especially important insurance package to have if you are doing off-site events.
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 commercial property insurance.
Read our Tattoo Parlor Business Insurance article for more info.
The startup costs associated with a tattoo parlor are often quite substantial. While you might be tempted to try and cut down on this cost by working out of your home, this is prohibited in a number of states. When choosing your tattoo parlor’s location, consider how much foot traffic the area has and how many other parlors are nearby.
Visit our How to Start a Tattoo Parlor guide to learn more about the costs of starting and maintaining this business.
Ongoing expenses for a tattoo parlor include ink, cleaning supplies, insurance, and rent.
Learn more about running a tattoo parlor.
A tattoo parlor makes money by charging customers for tattoos. Many tattoo parlors also offer body piercings.
Learn more about starting a tattoo parlor.
Many tattoo artists have taken advantage of the current high demand for tattoos and opened their own parlor. Tattoo artists typically start off making very little money, but over time, profits can potentially reach six figures if the business is successful. The relatively low startup cost for this business is another plus that can help boost its profit potential.
Learn more about starting a tattoo parlor.
