CHAT WITH US
LLC For Bookstores
Although several people enjoy reading on a Kindle, nothing beats the experience of buying a physical copy of their favorite novel from a bookshop. This is why bookstores have been a popular choice for independent business owners. There are even a variety of products to sell, from textbooks to novels.
If you are planning to turn your passion for books into a source of income, starting a bookstore LLC is a great option. Here, we will discuss what an LLC is, its pros and cons, and why you should form your bookstore as one.
Definition
What Is An LLC?
An LLC, short for Limited Liability Company, is a type of business structure that offers its owners asset protection and simplified taxes. LLC owners can also be directly taxed on profits, eliminating the need to file corporate taxes.
In addition, LLCs provide limited liability, ensuring that the personal assets of the owners remain separate from the debts of the company. This safeguards their assets in situations involving legal or financial disputes.
Advantages
What Are The Advantages Of A Bookstore LLC?
Below are the significant advantages that bookstore LLCs can experience when establishing their business.
Limited liability
With a bookstore LLC, you never have to worry about having your personal assets questioned or objected to, even if your business is going through a legal issue. This holistic safeguarding against business debts and liabilities is an inherent feature of LLCs, making them popular among those new to the business community.
Flexible taxation
As opposed to most other business entities, LLCs offer their owners and members the freedom to choose how they want their company to be taxed. Although this may not seem extraordinary, it does come in very handy and gives you a higher degree of freedom to decide their company’s financial matters.
Tax benefits and other incentives
In terms of taxes, you can also save your business large amounts annually by registering in a state with special incentives and tax benefits for LLCs, especially those for small businesses. This is particularly helpful for bookstore owners as it gives them greater financial independence.
Credibility
By forming an LLC, not only will you be creating a recognizable identity for your bookstore, but you will also be able to accelerate the process of building a brand image, attracting customers, and improving credibility. After registering your business, you can make a Google Business account and list your bookstore in Google Search. This will let you attract local customers and highlight reviews.
An LLC structure also helps in procedures such as qualifying for loans for the business and other legal and financial affairs.
Disadvantages
What Are The Disadvantages Of A Bookstore LLC?
There are little to no disadvantages to starting an LLC, except for the generic minor risks and problems of starting any bookstore, like raising capital and finding a suitable place to lease. Many bookstore owners may also find it difficult to file annual tax reports and maintain LLC information records. If you think you can not manage these responsibilities, hire a professional that can.
LLC Formation
How To Form A Bookstore LLC
While the process of forming an LLC may seem daunting, things are more manageable with proper preparation and, if necessary, guidance from professionals. Here is everything you need to know about forming a bookstore LLC, in particular.
- Choose your location
- Decide on a name
- Hire a Registered Agent
- Submit your Article of Organization
- Draft an Operating Agreement
- Get an EIN
- Comply with local permits
Choose your location
There are certain steps you will have to prepare and research beforehand when setting up your LLC. The first is to decide which state you wish to start your company in. After all, some states offer less tax and more benefits than others. Although some states allow you to work out-of-state business, opting for your home state as a first-time owner is better. There is less paperwork to worry about, and the costs are usually lower.
Decide on a name
Next, decide on a name for the LLC. It should also not be under the use of any other registered business in the state. This step may take time as there is often no unified database to check the availability of your preferred name, but you can start your search in your local Secretary of State’s database online. You can also visit their office in person and have them check your name’s availability for you.
Hire a Registered Agent
Another mandatory requirement by all states is the hiring of a registered agent. This agent can be you, your bookstore business partner, or a trained professional you can trust to accept and submit LLC documents on your behalf. The only condition is that they must have a permanent address in the state where the LLC is being set up.
Submit your Article of Organization
The most critical step of the process is filing for the Articles of Organization. This is the document that confirms your bookstore LLC’s registration with the Secretary of State. It contains essential information about your company, such as its name, address, member details, registered agent information, and more.
Additionally, it outlines the purpose of your LLC and confirms its compliance with your local business regulations.
Draft an Operating Agreement
The Operating Agreement is a valuable document that promotes the smooth operation of your bookstore. It provides a framework for your management structure, ownership percentages, and financial responsibilities, especially if you have multiple owners. It is not required by any means, but it will resolve any potential disagreements in the long run, especially when you are looking to transfer the ownership of your bookstore to someone else down the road.
Get an EIN
Then, get an Employer Identification Number (EIN) from the IRS. This will allow you to hire employees and open a business bank account for your bookstore LLC. Getting an EIN is free and takes literal minutes. Visit the IRS website to get started.
Business licenses and permits
Finally, depending on your situation, you may need extra licenses and permits from your state and local governments to legally operate your usiness. This could include:
- A professional license (such as a CPA license) if required by law in your jurisdiction
- Special local licenses required by city ordinances
- Zoning permits
- Special certifications required by law
- Other special permits, such as those necessary for selling securities in certain jurisdictions
Additionally, you may need to register with certain federal agencies, such as the Department of Labor or IRS, if you plan on hiring employees or engaging in certain investments or securities trading activities.
Comply with local permits
Lastly, check if your state has any required business licenses or permits for bookstore LLCs. This could be anything from a business permit to a general business license.
LLC Taxes
How Are Bookstore LLCs Taxed?
Operating an LLC has its advantages, but it naturally comes with taxes. Here are some of the applicable ones for bookstore LLCs.
Self-employment taxes
If your LLC operates as a sole proprietorship or partnership, you are classified as self-employed. As a self-employed individual, you are responsible for paying self-employment taxes on all your profits. Self-employment taxes consist of Social Security and Medicare contributions, which is typically 15.3% of your total net earnings each year.
If you decide to classify your LLC as a corporation for tax purposes, you can avoid paying self-employment taxes. Instead, your earnings will be subject to taxation similar to that of an employee receiving a regular paycheck. However, you will be subject to double taxation, as the corporation LLC needs to pay separate taxes to the state.
Sales tax
You are responsible for collecting and remitting sales tax on book sales and other taxable services, though how much and if you even need to depend on your local government. Research the tax laws in your specific jurisdiction so you can properly comply.
Payroll taxes
If you employ workers at your bookstore, then you are responsible for withholding various payroll taxes from their wages. Depending on your location, you may even be required to periodically submit payroll tax returns to the IRS and make unemployment insurance payments.
Costs
What Are The Costs Of Starting A Bookstore LLC?
Starting a bookstore LLC may appear expensive at first glance, but compared to other corporations, the budget you will have to set aside for it is more manageable. Here is a list of the essential costs:
LLC Costs
State filing fee
$50+
Registered agent service
$100+
LLC formation service
$50+
Operating agreement
$200+
Business license and permits
$50+
Employer Identification Number (EIN)
Varies
Initial legal and accounting fees
$200+
Equipment and supplies
$1,500+
Marketing and advertising
$500+
One crucial expense associated with setting up an LLC is the filing fee, which varies by state. It can range from as low as $50 to several hundred dollars. There may also be additional costs for legal and accounting services that are necessary for the process, should you choose to hire a professional to handle things for you. In fact, we recommend you do so if you are a first-time business owner.
Starting a bookstore is one of the easiest business ideas people can try their hand at, and forming an LLC for it is the smartest option. Consult with a legal expert before starting the registration process. StartGlobal can help you understand the costs involved and prevent any costly mistakes.
For a more detailed overview of forming LLCs in various states, check one of our guides below:
Comparisons
Is LLC The Best Entity For Me?
Maybe, LLC isn’t the right entity for you. Maybe it is a C-Corp. Only way to find out is to directly compare them all.
LLC vs Corporation (C-Corp)
Sole proprietorships and Limited Liability Companies (LLCs) are two of the most common business entities for individuals and small businesses. Learn what differentiates the two today.
LLC vs S-Corp
Not sure what business structure to choose? Learn about the key differences between LLC and S-Corp today.