Should I Start an LLC for My Wine Shop?

Starting a limited liability company (LLC) for your wine shop 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 wine shop, lawsuits can arise from things like food poisoning, false advertising, and business debt.

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

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

Do I Need an LLC for a Wine Shop?

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 Wine Shop

By starting an LLC for your wine shop, 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.

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

Example 1: You’re ready to expand your wine shop into neighboring cities. Even though you apply for a business loan and are approved, a large competitor ends up opening a wine shop in your area a few months later, which leads to a significant drop in your revenue. If you end up defaulting on your loan as a result, the limited liability provided by your LLC will shield your personal assets from all creditors as long as you didn’t personally guarantee the loan during its application.

Example 2: One of your customers takes a bottle of wine off of a shelf and it immediately shatters in their hand, causing multiple injuries that make them unable to work. If their insurance company sues your business, your personal assets could be protected by an LLC.

Example 3: Your wine shop also sells cheese and chocolates. When several customers contract a food-borne illness and require hospital treatment, they decide to bring a claim against your LLC for medical expenses, lost wages, and pain and suffering. If the court sides with the plaintiffs, your personal assets would be shielded as a result of your business’s classification.

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 Wine Shop

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 wine shop 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

Wine shops 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.

Wine shops will benefit from business insurance as it provides them with coverage for equipment, bodily injuries, trademark disputes, and a variety of other legal lawsuits that can cause significant financial harm.

Not just this, it can also assist your business in adhering to your state’s regulations (i.e., if you hire employees, etc.).

Common Situations Business Insurance May Cover for a Wine Shop

Example 1: If you host special events at your wine shop, like corporate events, weddings, and large social gatherings, the clients may request proof of general liability insurance (GLI) before they schedule the event and sign any documents. This is because they want to know that if an injury or accident happens on the property, the insurance company will pay the costs related to the accident or incident, including court costs, settlements, and/or attorney fees.

Example 2: If you rent your retail space and surrounding property from a landlord, they may require proof of GLI before accepting you as a tenant and allowing you to sign the lease. The primary reason for this is because you are financially responsible for any injuries that happen to customers while they are inside your leased space and any damage that may happen to their property due to negligence on the part of you or your employees.

Example 3: Due to negligence or an accident, a wine bottle could fall off a shelf or get dropped by one of your employees. If a customer slips and falls due to the spill and becomes injured, your general liability insurance covers the resulting claim and/or any fees associated with a lawsuit.

Other Types of Coverage Wine Shops 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 tow truck companies should obtain.

Commercial Property Insurance

Commercial property insurance covers damage to your building and the contents inside the building and on the property that your wine shop owns. Common covered damage types often include fire, theft, vandalism, and some weather events.

Commercial Liability Umbrella Insurance

Sometimes your commercial insurance policies won’t cover the entire cost of the claim submitted by the injured customer or the property damage they incurred. If this happens, you’ll need commercial liability umbrella insurance, which pays for claim overages. Without it, you could be responsible for all the incurred costs over your policy’s payout limitations.

Liquor Liability Insurance

Liquor liability insurance protects you in the event that a customer gets drunk on your property from the wine you serve and gets into a car accident on the way home or injures another person while drunk.

Workers’ Compensation Insurance

Workers’ compensation insurance pays for employee injuries that occur while they are on the clock or performing professional duties.

Commercial Auto Insurance

If your wine shop uses vehicles, like cars and vans, for business purposes, you will need commercial auto insurance in order to protect you against financial loss if your vehicle is in a car accident.

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, workers’ compensation insurance, and commercial property insurance.

Read our Business Insurance for Wine Shops article for more info.

For those considering opening a wine shop, it is worth noting that in addition to a fairly high startup cost, you will also be faced with thin profit margins and tight regulations.

Furthermore, the industry is riddled with red tape, although these regulations can vary significantly from state to state.

Visit our How to Open a Wine Shop guide to learn more about the costs of starting and maintaining this business.

A wine shop’s operating costs may include rent, payroll, inventory, and insurance.

Learn more about running a wine shop.

Wine shops make money by buying wine at wholesale prices and then selling them at a markup to customers.

Learn more about opening a wine shop.

Though the industry has significant regulations, overhead costs, and competition, many people find the added difficulty of opening a wine shop worth the potential profits. Wine is a popular drink, meaning there will likely always be a good supply of potential customers.

Profit margins for wine shops can vary considerably depending on your physical location as well as the regulations in your state.

Learn more about opening a wine shop.