Selling Laptop Pins: Do You Need to Form an LLC?

If you plan to sell two products a month - two lapel pins, and hope for sales of up to 100 of each on your website, do you need to form an LLC?

No, definitely not. First of all, don’t talk to a lawyer. Talking to a lawyer is helpful when you are pretty certain you want an LLC or if you have a legal question about the difference between LLCs and corporations or the benefits of having an LLC over being a sole proprietor.

The decision to get an LLC, which primarily allows you to benefit from having limited liability from your business risks while still avoiding the double taxation that a corporation would give you in most cases, with potential exceptions with S-corps in some U.S. states, is a business decision, not a legal one. As the owner of your business, you need to decide if the cost and administrative work required for getting an LLC is outweighed by the benefit of legal liability.

With lapel pins, I don’t think you have much to worry about. Could someone get a lapel pin pushed into their body and then suffer from tetanus and then sue you as a result? Yes, it is possible. However, is that likely to really happen such that you ought to go through the cost and effort of getting an LLC? Probably not.

Other than limited liability, the other benefit of having an LLC is creating more business credibility. Although this benefit may be more applicable for corporations, having an LLC can often make others treat you like a 'real' business, especially with financial institutions like banks or other companies you may wish to work with as sales channels for your pins. Customers, however, may not care so much.

Conclusion: Do You Need an LLC?

Based on only selling a few pins, 200 or less of two varieties, you don’t need an LLC. However, do you plan to stay at this sales volume forever? Will you ever expand to three, five, or ten other products? Will you ever be selling thousands or millions of pins or other products? If you have any realistic plans to grow and turn selling a few pins into a real business, then you may wish to seriously consider getting an LLC.

Remember that forming an LLC involves a set of administrative tasks, such as choosing a registered agent, drafting legal documents, and paying filing fees. These costs can quickly add up, so it’s important to weigh these expenses against the potential benefits of limited liability.

Frequently Asked Questions

Question: What is an LLC?

A Limited Liability Company (LLC) is a business structure that offers limited personal liability to its owners. This means that if your business faces legal or financial issues, your personal assets are generally protected. An LLC can be more flexible than a corporation, as it allows for pass-through taxation and provides more protection against personal liability.

Question: What Are the Benefits of an LLC?

The main benefits of an LLC include:

Personal Liability Protection: Your personal assets are protected from business debts and lawsuits. Tax Flexibility: You have the option to be taxed as a partnership, disregarded entity, or corporation. Business Credibility: Having an LLC can make your business appear more legitimate and trustworthy, which can be beneficial when dealing with financial institutions and other companies.

Question: When Should I Form an LLC?

While you don’t need an LLC for small-scale operations, it may be a good idea to form one when:

Your business is likely to grow and become more profitable. You are dealing with significant amounts of money and customers. You are partnering with other businesses or private investors. You want to sell your business in the future.

Ultimately, the decision to form an LLC depends on your business goals, risk tolerance, and financial situation. It’s important to carefully consider these factors before making a decision.