Should I Start an LLC for My Vintage Toy Business?
Starting a limited liability company (LLC) for your vintage toy 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 a vintage toy business, lawsuits can arise from things like employee and customer injuries, trademark infringements, and unpaid debt accrual.
LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your vintage toy store seem more credible.
Recommended: Use Northwest to form an LLC for $29 (plus state fees).
Do I Need an LLC for a Vintage Toy 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 a Vintage Toy Business
By starting an LLC for your vintage toy 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.
Vintage toy businesses will benefit from liability protection because of the risk of being sued for fraud or negligence (potentially selling imitation toys, knowingly or unknowingly), trademark infringement, and even personal injuries.
Example 1: While bringing in a box of products, a delivery driver trips over a pile of vintage toys and fractures their right wrist. If they were to file a medical damages lawsuit against your vintage toy business, your limited liability protection would protect you from having to compensate the claimant using your personal assets.
Example 2: You agree to sell 10 vintage toys to a loyal customer, offering him a discount. When he comes to your store to collect and pay for the toys, your cashier makes the customer purchase everything at the normal retail price. When you terminate your employee’s contract as a result, your LLC is faced with a wrongful termination claim. Regardless of how the claim progresses in court, your limited liability protection will ensure that your personal assets aren’t used for compensating the claiming party.
Example 3: After securing a substantial business loan, you decide to start a second vintage toy store in a nearby area. When it doesn’t perform as well as your first store, you struggle to pay the loan back on time and begin accruing debt. As a result of your business’s LLC classification, the lending party will not be able to sue you in order to recoup their investment if your business is unable to pay them back.
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 Vintage Toy 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 a vintage toy 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
Vintage toy 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).
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.
As a vintage toy store owner, business insurance can protect your business’s assets (e.g., vintage toys, storefront, etc.) from a variety of different lawsuits. These include those that relate to trademark infringements, false advertising, and customer injuries within your store.
Common Situations Business Insurance May Cover for a Vintage Toy Business
Example 1: A customer is visiting your shop to ask about a certain vintage toy he has been unable to find elsewhere. After discussing the toy with you, he turns around to leave and trips over a display. He falls and suffers an injury to his arm, which requires medical care. He asks that you pay for the treatment. Your general liability insurance would cover the costs for treatment if you file a claim.
Example 2: A competing toy company has taken issue with your logo and has filed legal action against your business. General liability insurance would pay for the legal fees to defend your business and a settlement if one is necessary.
Example 3: You are carrying a box of toys out to a customer’s car when you trip and drop the box on her foot, breaking her toe. She decides to sue your business for her injuries and the lost wages that result. Your general liability policy would pay for the cost of your legal defense, including hiring an attorney. It would also pay for a settlement if one is required to end the lawsuit and protect your company.
Other Types of Coverage Vintage Toy 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 vintage toy stores should obtain:
Product Liability Insurance
If you sell a toy to a customer and they claim the item caused them harm, they may file a lawsuit and try to collect damages against your business. Your product liability policy can be tailored to your business to protect you against this type of liability. If you are sued, your insurer will cover the cost of your legal defense and any settlement that’s required.
Commercial Property Insurance
Commercial property insurance protects your products and any other covered business property. If you were to lose much or all of your property due to fire, theft, or natural disaster, your commercial property policy would help you replace your valuable vintage items. This can be the difference between keeping your business afloat or closing up shop.
Workers’ Compensation Insurance
Your state likely requires you to carry workers’ compensation insurance if you have any employees, full-time or part-time. The policy you purchase will pay for medical treatment and lost wages if an employee is hurt performing work-related duties. With workers’ comp, your business and your employees are protected in the event of an injury.
Commercial Umbrella Insurance
In most cases, you can expect your general liability insurance to cover your business from potential liabilities related to doing business. However, there are times when the limits of a general liability policy can be exceeded. For instance, if you were to lose a major lawsuit, the damages may go beyond your general liability policy. If you have commercial umbrella insurance, it will pick up where the general liability policy leaves off.
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 Vintage Toy Store Business Insurance article for more info.
You should be able to start a vintage toy business with around $40,000. This will need to go towards:
- Purchasing and maintaining a variety of toys
- Purchasing business insurance and accounting software
- Acquiring a suitable lease
- Purchasing a business website, fast internet connection, business phone, and work computer
Visit our How to Start a Vintage Toy Store guide to learn more about the costs of starting and maintaining this business.
The ongoing expenses of running a vintage toy business include inventory, marketing, insurance, utilities, and rent (if you open a brick-and-mortar store).
Learn more about running a vintage toy business.
Vintage toy businesses make money from the sales of the vintage toys in their inventory.
Learn more about starting a vintage toy business.
The collectible toys market, which includes vintage toys, is estimated at $3 billion. This business is great for people who have a passion for toys and know how to value them. A good marketing strategy is also critical for the success of a vintage toy business.
The average profit margin for a vintage toy business needs to be at least 40% to be sustainable.
Learn more about starting a vintage toy business.
