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There’s really only one question to ask yourself when deciding if an LLC is right for your skin care business:
“Is it even slightly possible that one of my customers could get a skin irritation (at best) from one of my handmade products?”
If the answer to this question is YES, save this post to reference until you’ve registered with your state.
Making chemical-free skin care products by hand is incredibly rewarding, but it doesn’t come without risks.
Disclaimer before we get started – understand that I am a skin care maker and educator. Not a lawyer, not a financial advisor, etc.
*I am a maker, not a lawyer or accountant*
The information contained in this post is provided for informational purposes only, and should not be construed as legal advice on any subject matter. Read the full legal disclaimer here.
The purpose of this post is to help you:
This publication has been written specifically for U.S. business owners. Regardless of location, make sure you check with your local government rules and regulations, as information can even vary within the U.S.
No.
An LLC is highly recommended for handmade skin care entrepreneurs, especially if you will be selling your products in person or online.
Before diving into an LLC specifically, we’re going to very briefly compare a sole proprietorship and an LLC side-by-side.
Why?
Sole proprietorships are recommended on a couple of popular handmade business websites, and I want it to be crystal clear why that might be okay for *some* industries…but not others.
A sole proprietorship is an unincorporated business owned by one individual. There is no separation between the business and the person running it in terms of income, taxes, etc.
An LLC (a limited liability company) is a business structure that combines the characteristics of a corporation with a sole proprietorship.
The owner and the business are seen as two separate entities.
These are just a few differences between a sole proprietorship and an LLC. There are other topics to consider, such as how you are taxed and the required licenses. Visit the U.S. Small Business Administration for more details.
A customer reaches out to you with pictures of extremely irritated, dry skin and rash…evidence of an accidental lye-heavy bar.
A mother gifted her teenage daughter a citrus lip balm blend that you made. Daughter uses it during a sunny, beachy Spring Break trip. Her lips become severely blistered and cracked…clearly a phototoxic reaction that may cause permanent discoloration.
A new mom uses your nursing balm during her first weeks of postpartum. She discovers that her infant has an allergy to coconut oil and is certain that your product is to blame.
What kind of assets do you have that are at risk if these individuals decide to file a claim and win?
If you have a sole proprietorship, your assets include:
If you have an LLC, your assets include:
These are all hypothetical situations simply to get you thinking ‘what if’…
But as skin care makers, these examples should make MAJOR sirens go off in your head.
Obviously, you’ll need a quality control system in place for your recipes and products, but you still may come across a customer that has a reaction (even if it’s no fault of your own).
No. Handmade industries are NOT equal.
The need for liability protection is much, much higher for a skin care entrepreneur than for a basket maker or ceramicist.
In our industry, it quite literally pays to think ahead and be proactive about our business structure.
Revisiting the intro of this post, ask yourself the following questions:
1. Is it even slightly possible that someone could get a skin irritation (at best) from my product?
2. Do I have personal assets (property, bank accounts, possessions)?
We are not in a low-risk industry, my fellow maker.
If you said yes to either question above, review the steps below to familiarize yourself with the process of setting up an LLC for your skin care business.
There are three ways to go about setting up your LLC:
1. Have someone create an LLC for you.
2. Create an LLC on your own.
3. Create an LLC with a guided roadmap and expert advice.
Having a service create your LLC is one option, such as Legal Zoom (this is the best-rated company to use for online business formation).
They will ask you relevant questions, share what services they provide that would fit your business needs, and then offer you a business package.
This option has an extra fee on top of the actual filing fees, but it will save you research time and wondering if you’re setting everything up correctly.
I personally ended up going with Legal Zoom for my first LLC because I was working a 9-5 job while starting up my skin care business.
In addition to that, my husband and I were moving between states and didn’t have the time to research the details of our seemingly messy situation.
With a mile-long to-do list, I was feeling frazzled and needed to make sure it was done correctly.
Having someone else set up my LLC had a price tag, but I still consider it a great business ‘purchase’ for that time in my life due to peace of mind.
You are building a business from nothing to something.
If you can do that, there is no doubt that you can successfully set up your own LLC if you have the time and patience.
I went this route with my second LLC (when I had more time to dig into legalities a bit), and it is more budget-friendly than hiring a service.
Most e-commerce entrepreneurs choose to create an LLC in the state they live in and ship their products from.
If you plan on having an actual storefront in multiple states, you need to register in each state.
Look up the rules and checklist for creating an LLC in your desired state (literally just Google: ‘how to form an LLC in _____).
Choose a person or business to send and receive legal documents on your behalf. This must be in your same state and be available during regular business hours.
This is what officially creates your LLC status. You need to provide the following to your state (plus any extra state-specific documents):
This isn’t *technically* required in most states, but it helps to get things down on paper for future growth and hiccups (especially when there is more than one founding member). An Operating Agreement outlines:
An EIN (employer identification number) is basically a social security number for your business.
There are many benefits to creating an EIN for your skin care business, including the ability to open business bank accounts and hire any employees (if you previously had an EIN for a sole proprietorship, you’ll need to get a new one for your LLC).
For my third LLC, I was ready to grow and scale my skin care business and wanted to make sure I knew EXACTLY what I was doing on the legal end of things – I wanted to be completely in charge of truly understanding the WHY and HOW behind ALL of the fancy business things.
I invested in the Get Legit Toolkit by Janet LeBlanc (founder and CPA over at Paper+Spark), and it cleared up all of the behind-the-scenes things for me.
She walked me through:
If you are ready to tackle the legal aspects of your business, or you want to do things on your own and would love a hand to hold, I highly recommend considering the Get Legit Toolkit.
To make sure this is the right step to take, you can enroll in the free webinar to get a feel for Janet’s teaching style and what she covers:
Whether you decide to have a service create your LLC for you or you dive in on your own, having this liability protection is worth every minute and penny.
Take time to celebrate this huge step for your business…
…and your now-legally-separate self!!!
Christine Glaser, C.A.
Christine is a certified aromatherapist, essential oil specialist, and organic skin care formulator. She loves empowering others with tools to make healthy changes and understand where natural options can be woven into the fabric of everyday routines.
