Should I Start an LLC for My Upholstery Business?

Starting a limited liability company (LLC) for your upholstery 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 an upholstery business, lawsuits can arise from things like damaging a customer’s property while attempting to clean it, negligence leading to the customer injuring themselves, and using a logo which is protected by copyright law.

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

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

Do I Need an LLC for an Upholstery Business?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form 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 an Upholstery Business

By starting an LLC for your upholstery 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.

Upholstery businesses will benefit from liability protection because of the risk of property damage, personal injury, and other general business risks.

Example 1: A client’s valuable antique couch receives structural damage while you are cleaning it. They sue for the repair costs. As an LLC, limited liability will protect your assets so they can not be used to pay for this.

Example 2: You leave out some equipment while on lunch. A client trips over them and suffers several injuries. They sue for medical costs, lost wages, and pain and suffering. Limited liability protects your assets as the LLC owner so they could not be used to pay for the expenses.

Example 3: The logo you have recently put in advertisements shares many characteristics with a competitor’s, and they are now suing you for copyright infringement. Should your business be found in the wrong, your assets could not be taken in the settlement since they are protected with limited liability as an LLC.

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 an Upholstery 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 an upholstery 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

Upholstery 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.

Common Situations Business Insurance May Cover for an Upholstery Business

Example 1: When you’re upholstering a custom chair, a termite burrows itself into the stuffing and begins attacking the wood of the chair. General liability insurance would cover the costs to repair the chair.

Example 2: Your upholstery company’s name has a logo that is similar to another furniture store in an adjacent town. The store decides to sue your company for lost business due to customer confusion. General liability insurance would cover the costs of the lawsuit or settlement.

Example 3: During a demonstration to a client, some of your furniture oil spills on the ground. The customer slips on the oil and hits their head on your workbench. General liability insurance would cover the costs of their medical bills.

Other Types of Coverage Upholstery 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 upholstery businesses should obtain.

Commercial Auto Insurance

If you transport any of your materials in a vehicle, a commercial auto insurance policy is there to cover both the inventory and tools you use for your business. A personal insurance policy will only cover standard bodily injury and property damage, not your commercial property.

Commercial Property Insurance

If you own the space where you work, you’ll need commercial property insurance to cover your equipment, inventory, and structure if it’s damaged or destroyed. From strong storms to opportunistic criminals, this insurance will compensate business owners for a variety of events.

Workers' Compensation Insurance

Upholstery businesses can use dangerous tools or chemicals to treat their furniture. This insurance ensures employees get the funds they need to cover either sudden accidents or injuries caused by repetitive motions.

Read more about workers’ compensation insurance.

Professional Liability Insurance

If you give your clients advice about how to best care for their furniture, professional liability insurance is there to cover you in case you make a mistake. If you omit an important detail or give incorrect directions, a client could claim that your advice ruined their investment. This is likely only needed if you work with especially valuable furniture, such as in-demand commercial antiques or museum pieces.

Product Liability Insurance

This insurance provides extra protection in case a customer is injured due to your furniture. For example, if the sharp wooden edge of an armrest wasn’t properly covered, this insurance will help cover any medical expenses that result from the defective product or workmanship.

Commercial Umbrella Insurance

This insurance is available to upholstery business owners for major liability claims. It provides protection above and beyond a general liability policy. If your business faces a particularly long or costly lawsuit, this insurance will protect you even when your general liability limits have been met.

Read more about commercial umbrella insurance.

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 Business Insurance article for more info.

Startup expenses for an upholstery business are fairly minimal. Business owners need a workspace and tools, and many have a vehicle for transporting furniture to and from client’s sites.

When setting up a workspace, it’s important to keep the space on the ground level so that items don’t have to be carried up or down stairs. When choosing a vehicle, it’s important to have a large and covered vehicle.

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

The ongoing expenses of running an upholstery business include maintenance, supplies, utilities, marketing, and insurance.

Learn more about running an upholstery business.

Upholstery businesses make money from fees for reupholstering furniture. Some upholstery businesses make money from online courses teaching people some tricks of the trade.

Learn more about starting an upholstery business.

An upholstery business repairs and reupholsters furniture in homes, offices, and vehicles. Some of them even make custom furniture for clients.

The furniture repair and reupholstery market is estimated at $2 billion. The average profit margin for an upholstery business needs to be at least 12% to be sustainable, with some upholstery businesses showing profits as high as 70%.

Learn more about starting an upholstery business.