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Should I Form an LLC for My Comic Book Shop?

Many comic collectors dream of opening a store of their own, but owning a comic book store is fraught with potential liability—both in the form of standard retail concerns and the specialized issues unique to the comics industry. An unprepared owner could lose more than just their company’s assets if something goes awry.

One of the smartest ways to protect yourself is by forming a limited liability company (LLC) for your store. LLCs help safeguard your personal assets in the event of disaster or legal action and provide flexible tax options that may benefit your company.

Comic Shop Ownership Liabilities

Comic shops are subject to the same kind of risks that come with owning any retail business, like theft, damage and accident liability. But comic book shops are resellers, so they have some unique risks of their own, like:

  • Delayed releases. If a major release is delayed, shops that ordered that book will have their return on investment delayed as well. And usually, you can’t delay rent. Many shops closed in the 1990s when erratic and unreliable publishing schedules became a common problem at mainstream publishers and shops were left holding the bag.
  • Over-ordering. Comic book shops sometimes make large orders of highly anticipated books. But if your shop is left with an inventory you can’t sell, that money is lost. Some distributors and publishers used to allow returns of unsold books, but that practice is rare in modern comics retail. Over-ordered and under-performing books were another major factor in shop closures during the 1990s and the early 2010s.

If your comic book shop can’t pay its debt, and you never took the steps to form a business entity with the state, you’ll likely be held personally liable.

How an LLC Can Protect Your Comic Book Shop

Many comic shops start off as sole proprietorships or general partnerships—meaning, a person or a handful of people who start selling comic books without filing paperwork with the state to form an official business entity. In those cases, there’s no legal separation between the business and its owners. Any action taken against the shop (like a lawsuit) is taken against the owners.

However, registering your comic shop as an LLC creates a separate legal entity for the business. Any action taken against the LLC excludes the owners of the company (called members). You might lose your comic shop’s assets, like its accumulated merchandise or other property, but your own assets—like your home, vehicle or other personal goods—will not be in danger of seizure to pay LLC debts or legal fees.

Why should I make my comic shop an LLC and not a corporation?

Corporations also offer limited liability, but they’re generally subject to stricter management and tax regulations than LLCs are. For example, corporations usually have shareholders, a board of directors, and officers. They have rigid meeting, record-keeping, and voting requirements. They also have to pay corporate taxes (21%).

Meanwhile, LLCs get the benefit of the same default pass-through taxation that sole proprietorships or partnerships do, where net income passes through the business to the owners, without the comic book shop being taxed as a separate entity. And how an LLC makes decisions is very flexible—it’s usually defined in the LLC’s operating agreement.

How Do I Start an LLC for My Comic Book Business?

LLCs are formed at the state level, which means every state has its own process for starting one. Luckily, in most states, the process is pretty similar.

1. Get a Registered Agent

A registered agent is someone you appoint to receive legal mail on your business’s behalf, and having one is a requirement for every LLC. Your registered agent must have a physical address located in your state and be available during normal business hours to accept service of process. Hint: we do that!

2. File Articles of Organization

Articles of Organization (called a “Certificate of Organization” or “Certificate of Formation” in some states) is the formation document you’ll fill out and file with your Secretary of State’s office to form your LLC. Every state has its own Articles, but most ask for basic information about your business, like its name, address, ownership information, and registered agent address.

3. Pay a Filing Fee

When you file your Articles of Organization, you’ll have to pay a filing fee to the state. Every state charges a different LLC fee. Colorado, for example, charges $50, while Massachussetts has gone—in our estimation—completely bonkers and charges $500.

And that’s it! Those three steps will form your LLC. However, there’s always more to do—you’ll have to file annual reports, open a business bank account, and maybe get a business license, for starters.

Want help creating your LLC’s origin story? Sign up for a free account and get access to our entire legal forms library—every form you’ll ever need to start and maintain your LLC.

This entry was posted in Opinion.