Should I Start an LLC for My Used Book Store?

Starting a limited liability company (LLC) for your used book 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 used book store, lawsuits can arise from things like adopting a similar logo to a competitor’s plus property damage and personal injury that occur on the business’s premises.

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

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

Do I Need an LLC for a Used Book Store?

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 a Used Book Store

By starting an LLC for your used book 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.

Used book stores will benefit from liability protection because of the risk of personal injury, and libel claims.

Example 1: While perusing your store, a shelf comes loose and falls on a customer. They ask you to pay for your medical expenses. Limited liability as an LLC protects your personal assets so they could not be used to pay for the expenses.

Example 2: The logo you are currently using is very similar to another book store in your area and they are suing you for copyright infringement. Should you be found in the wrong, limited liability as an LLC would protect your personal assets in the settlement.

Example 3: A sign you hang above your business falls onto a customer’s car, breaking the windshield. They demand you pay for the damage. Your personal assets would be protected from being used for this since your store is 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 a Used Book 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 used book 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

Used book 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 the limited liability protection from an LLC protects your personal assets, not your business assets.

Your building is pivotal to your business so it needs to be protected. Having insurance would help with the costs of damage done to your store, whether it be from a customer or inclement weather, so you can get back to work faster.

Common Situations Business Insurance May Cover for a Used Book Store

Example 1: A heavy book falls on a customer’s head as they reach for a high shelf and accidentally knock down several books. The injured customer decides to sue. General liability insurance would cover your legal fees and any damages awarded in a settlement.

Example 2: A customer drops a book on the floor and does not tell an employee. Another customer trips on that book, falls into a shelf, and needs medical treatment for his injuries. General liability insurance would cover the injured customer’s medical bills.

Example 3: Disregarding a sign warning people not to lean on your glass display case, a customer leans on the case, breaks the glass and receives several deep cuts. General liability insurance would pay for the customer’s medical bills and your legal fees in the event of a lawsuit.

Other Types of Coverage Used Book 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 used book stores should obtain.

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.

Commercial Property Insurance

You’ve made major investments to maintain a broad collection of books. 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, burglary, or natural disaster. Commercial property insurance would cover the cost of replacing your inventory after an accident so you can recover quickly.

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.

Data Breach Insurance

If you collect and store employee and customer data, such as personal information and credit card numbers, you’re responsible for safeguarding that sensitive information. In the event of a data breach, this coverage would pay for your costs associated with any related lawsuits.

Employee Theft Insurance

Employee theft insurance protects your business by covering your financial losses in the event an employee steals books, cash, or other tangible items from your store.

Antique and Rare Books Insurance

If your store contains a collection of antique or rare books, this coverage would help cover the cost to repair or replace that specialized inventory in the event of damage or theft.

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, commercial property insurance, and workers’ compensation insurance if you have employees.

Read our Business Insurance article for more info.

The costs associated with opening a used book store business vary a lot depending on whether a store will be based online or have a physical storefront.

A business with a physical storefront must pay for a space and need to carry more inventory. The total cost of opening a physical book store can range from $8,250 to $18,950.

Online used book stores cost much less to open. Their primary startup expense is inventory, which can be adjusted to a business owner’s budget.

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

The ongoing expenses of running a used book store include utilities, inventory, maintenance, labor, rent, marketing, and insurance.

Learn more about running a used book store.

Used book stores make money from selling used books, magazines, videos, and video games for a profit.

Learn more about starting a used book store.

As the name suggests, used book stores sell secondhand books and other forms of media. Some used book stores also provide rare or out-of-print books.

The average profit margin for a used book store needs to be at least 5% to 10% to be sustainable. Some of these stores attract customers by hosting readings and local community events. Others have moved some of their sales to the internet to gain a wider audience.