Should I Start an LLC for My Pottery Business?

Starting a limited liability company (LLC) for your pottery 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 pottery business, lawsuits can arise from things like accidents caused by your employees when delivering a product to a customer or injuries suffered by a customer you are showing your merchandise to.

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

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

person making pottery art on a pottery wheel

Do I Need an LLC for a Pottery 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 Pottery Business

By starting an LLC for your pottery 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.

Pottery businesses will benefit from liability protection because art and fine arts businesses, including pottery shops, face a variety of risks associated with employee and client safety in context to the operational use of pottery-making products.

Example 1: You own a pottery studio that also offers classes to the public. One day, an instructor slips and falls while demonstrating a new technique to students, resulting in serious injuries. If the employee sues, liability protection will limit any potential legal damages to only your business assets, protecting your personal finances from any losses.

Example 2: You host an exhibition for potters in your community. While you show a guest your collection, a poorly placed ceramic pot falls from the shelf to his leg and causes him injury. If he decides to sue for compensation, your business may be affected, but you will not be required to pay compensation from your personal assets.

Example 3: A gardener orders flower vases for his nursery to be delivered. While driving to the nursery, your employee accidentally causes an accident, leading to another car being damaged and the vases shattering. If either the gardener or the other driver sues for damages, your business’s assets will be affected, but you will be protected.

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 Pottery 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 pottery 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

Pottery 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.

Pottery businesses can carry a significant level of risk with them and may need insurance for employees' injuries, damages to pottery equipment, theft of products, and legal actions from employees and clients.

Common Situations Business Insurance May Cover for a Pottery Business

Example 1: During a beginners’ class, a student accidentally leans on what they think is a dormant kiln and sustains severe burns on their arm and back. General liability insurance would cover the student’s medical bills as well as your legal fees and any awarded payout if they decide to sue.

Example 2: An unscheduled delivery of clay arrives when your shop is understaffed, so you ask the driver to unload it on your receiving dock by themselves. The driver doesn’t realize the dock ramp is already down and, without your guidance, hits the ramp. The impact crushes his rear bumper and damages his wheel well. General liability insurance would cover the vehicle repair costs and replace your broken ramp.

Example 3: A customer arrives before opening hours to pick up an order and slips on the newly mopped floor. The resulting fall leaves them badly injured and upset that you did not display a “caution” sign, so they threaten to sue. General liability insurance would cover the customer’s medical bills as well as your legal costs and any settlements from a lawsuit.

Other Types of Coverage Pottery 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 pottery shops should obtain:

Commercial Property Insurance

You’ve made major investments to create an inviting space for your customers with the right kilns, furniture, and other pottery equipment. If you own the building in which you operate, you’re responsible for all business-related property housed there in the event of a fire or other natural disaster. Commercial property insurance would cover the cost of repairing or replacing your equipment after an accident so you can reopen as soon as possible.

Workers’ Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover but also any disability benefits stemming from a work-related accident.

Commercial Umbrella Insurance

Even the most responsible business owners sometimes face an accident or lawsuit so catastrophic that it threatens to exhaust the limits of their primary insurance coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.

Commercial Auto Insurance

Your personal auto coverage won’t pay for damages from a work-related accident when you use your personal car to make deliveries or complete other business duties. Commercial auto insurance protects your employees and other drivers in the event of a work-related 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 and commercial property insurance.

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

Depending upon your needs, you’ll either set up shop in your home or garage or rent or purchase studio space. Once you have that, you will need to budget for carving tools, display shelves, a kiln, a pug mill, glaze, colorants, a wheel, a work table, clay, and even a business card.

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

The main ongoing costs of pottery businesses will include the price of additional pottery materials and any web or marketing costs associated with running the business.

Learn more about running a pottery business.

Pottery businesses make money through the sale of pottery items to customers, normally charging a specific cost per item purchased. Some businesses also offer lessons and rent out their studios for others to use.

Learn more about starting a pottery business.

Pottery businesses are involved in the crafting and selling of pottery products. Some pottery business owners customize their product offerings to client requests, while others make and sell goods as a product of their vision.

The average pottery shop has the potential of profiting as much as $45,000 in a year.

Learn more about starting a pottery business.