Do I Need an LLC for My Longarm Quilting Business?

Starting a limited liability company (LLC) for your longarm quilting 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 longarm quilting business, lawsuits can arise from things like customer dissatisfaction with one of your quilted products or employees experiencing injuries as a result of working on products.

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

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

Should I Start an LLC for My Longarm Quilting Business?

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

You should start 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 Longarm Quilting Business

By starting an LLC for your longarm quilting 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.

Longarm quilting businesses will benefit from liability protection because craft and hobby businesses, including longarm quilting businesses, face a variety of risks associated with customers visiting the business location.

Example 1: A fire occurs at your storefront, causing damage to customer creations and neighboring businesses. Following this, the neighbors sue your business for damages. Limited liability protection will ensure that the owner’s assets remain protected from the lawsuit.

Example 2: A customer is unsatisfied with their finished product and demands a refund, which you refuse, leading the customer to sue the business. If found liable, only the business’s assets will be used to pay for any fees associated with the lawsuit.

Example 3: An employee is working long hours and under high levels of stress due to the demands of the job. They begin to experience symptoms of burnout and depression. After laying complaints about the workplace, the employee sues the business. Regardless of the court’s ruling, limited liability protection will ensure that the owner’s assets are unaffected.

Example 4: During one of your longarm quilting classes, a student injures herself, requiring medical treatment. She claims that you didn’t warn the class of any safety issues and sues you.

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 Longarm Quilting 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 longarm quilting 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

Longarm quilting 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.

Longarm quilting businesses need insurance to protect themselves from financial losses and liabilities that may arise in the course of running the business. Business insurance can help cover legal costs in the event of a lawsuit, as well as financial protection against losses from accidents or injuries.

Common Situations Business Insurance May Cover for a Longarm Quilting Business

Example 1: Your client has left her sewing machine with you, as she is hoping you might be able to fix an issue. Your employee knocks it off the table, destroying it. General liability insurance should cover the cost of replacing this expensive equipment.

Example 2: During a class you are teaching, a student injures herself, requiring medical assistance. A general liability policy should cover her medical bills.

Example 3: On a social media post, an employee implies your competitor is unprofessional. The company has named you in a lawsuit, claiming they have lost revenue from this slander. General liability insurance should cover your legal representation and court-awarded damages.

Other Types of Coverage Longarm Quilting 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 longarm quilting businesses should obtain:

Commercial Property Insurance

Commercial property insurance, often written as part of a business owner’s policy (BOP), insures the business-owned property, including the repair and/or replacement of the building and business property kept onsite.

To ensure proper coverage, policyholders should review coverage limitations and potential added endorsements. Entrepreneurs working out of their homes should inquire about the cost of home-based business insurance.

Workers’ Compensation Insurance

Once your company has grown enough to have team members, the state will require you to cover them on a workers’ compensation policy. If an employee injures themselves performing business activities, the policy would pay their medical expenses and a portion of their lost wages. It will also protect you should a lawsuit arise from the accident, providing legal defense and court-awarded damages and/or settlements.

Business Interruption Insurance

If your business has to shut down after a property claim, the financial impact could prove devastating. Business interruption insurance, also known as business income insurance, lessens that burden. It provides loss of income, fixed expenses, and extra expense coverage, setting the business up at a temporary location while building repairs are being completed.

This insurance is generally offered as part of a business owner’s policy (BOP) package.

Commercial Auto Insurance

If a business-owned vehicle is in an auto accident, commercial auto insurance can pay for the repairs to damaged vehicles, as well as medical expenses, liability claims, and lost equipment. While the state mandates this policy’s minimum limits, owners should consider purchasing higher than the required minimum.

You can purchase commercial auto insurance as a standalone policy or as part of a business owner’s policy (BOP).

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.

Read our Business Insurance for Longarm Quilting Businesses article for more info.

Starting a longarm quilting business requires an investment in equipment, including a frame and machine, needles, thread, pantographs, and other supplies. The total costs for these can go as high as $15,000.

Visit our How to Start a Longarm Quilting Business guide to learn more about the costs of starting and maintaining this business.

Ongoing expenses are pretty much limited to the general administrative fees associated with running any business. You’ll also want to make sure your equipment is serviced regularly and that you have a selection of materials on hand.

Learn more about running a longarm quilting business.

Profit is generated by charging customers unique fees for the various services you provide them with.

Learn more about starting a longarm quilting business.

Longarm quilting businesses offer hobbyist quilters the service and use of a longarm machine and frame, which is a larger and more special machine than the machine individuals typically have in their homes.

Longarm quilting businesses will also typically sell their own artistic creations and will sometimes accept custom work when customers approach with an inspiring piece.

Your longarm quilting business’s profit will depend on the number of services you provide in addition to how much you charge for each square inch.

Learn more about starting a longarm quilting business.