Should I Start an LLC for My Organic Hygiene Products Business?
Starting a limited liability company (LLC) for your organic hygiene products 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 an organic hygiene products business, lawsuits can arise from things like intellectual property law disputes (e.g., copyright and trademark infringements, etc.), customer and employee injuries, and false advertising allegations.
LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your organic hygiene products business seem more credible.
Recommended: Use Northwest to form an LLC for $29 (plus state fees).
Do I Need an LLC for an Organic Hygiene Products 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 an Organic Hygiene Products Business
By starting an LLC for your organic hygiene products 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.
Organic hygiene products businesses will benefit from liability protection because of the risk of being sued for personal injuries, product liability, and other things.
Example 1: When a customer suspects that some of your products are not organic, he files a false advertising lawsuit against your LLC. If your organic hygiene products business was to accrue significant debt as a result of the lawsuit, your limited liability as an LLC owner would prevent any party from suing you personally in order to get paid.
Example 2: After an employee accidentally copies a competitor’s slogan on your business’s social media accounts, you discover that you have accidentally infringed on another business’s trademarked work. Even though you immediately terminate your employee’s contract, an infringement lawsuit is brought against your LLC. Here, limited liability will ensure that your personal assets remain safe from the claiming party, even if your business is unable to adequately compensate them.
Example 3: While attempting to open the door for a customer, an employee slips and bangs his head on the door’s handle. As a result, he suffers from a severe concussion, and requires urgent medical treatment. When you refuse to offer any sort of compensation, a medical damages lawsuit is brought against your LLC. As a result of your organic hygiene products business’s LLC status, your personal assets will remain “out of bounds” to the claimant.
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 an Organic Hygiene Products 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 an organic hygiene products 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
Organic hygiene products 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.
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, product liability insurance, and commercial property insurance.
Read our Small Business Insurance article for more info.
The most significant costs that you will have to take into account when starting an organic hygiene products business is product formulation, manufacturing, and testing.
If you need to pay someone to develop a unique formulation for you, you will likely need to spend from hundreds to tens of thousands of dollars depending on the formula’s ingredients and complexity.
You will also need to factor in the cost of getting your products organic certified, which can cost tens of thousands of dollars each year per product.
Visit our How to Start an Organic Hygiene Products Business guide to learn more about the costs of starting and maintaining this business.
Manufacturing, shipping, rent, labor, insurance, and yearly recertification are the primary ongoing expenses.
Learn more about running an organic hygiene products business.
An organic hygiene products business sells organic hygiene products for a profit.
Learn more about starting an organic hygiene products business.
An organic hygiene products business sells a variety of items including all-natural soaps, shampoos, and cosmetics. Gross retail profit margins can reach 80%.
Learn more about starting an organic hygiene products business.
