Should I Start an LLC for My Moving Company?

Starting a limited liability company (LLC) for your moving company 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 moving company, lawsuits can arise from things like losing or damaging a customer’s belongings during the process of transporting them in your trucks.

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

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

Do I Need an LLC for a Moving Company?

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 Moving Company

By starting an LLC for your moving company, 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.

Moving companies will benefit from liability protection because they can face liability if they damage customers’ possessions during a move. They also can face a personal injury lawsuit if someone is injured by a falling object or slips and falls in the moving company’s office.

Example 1: Your moving company is sued by the garage that services its vehicles for an unpaid amount relating to a promotional special. You maintain that “payment” was to be made by your participation. If the garage wins, it can only be paid from business assets, not your personal assets, which are protected.

Example 2: Your moving company is unable to keep up with the installments on a vehicle loan, and the bank takes you to court. If its claim succeeds, the bank can only garnish your business bank account, not your personal bank account, even though the latter may be at the bank.

Example 3: To pursue other business ventures, you decide to close your moving company business. You are worried because the business does not have enough assets to clear off all its debt. Despite that unfortunate situation, your personal assets would not be affected; they are protected by the limited liability shield of the LLC.

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 Moving Company

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 moving company 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

Moving companies 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.

A moving company is likely to face claims for lost and damaged property, as well as personal injury. These risks are covered by general liability insurance, which also covers legal fees and court awards.

Common Situations Business Insurance May Cover for a Moving Company

Example 1: As employees are loading items onto a truck, a passerby trips over a box and sustains multiple injuries in the fall. General liability insurance would likely cover any legal costs and injuries associated with the incident.

Example 2: Employees drop an expensive couch down a flight of stairs. The couch and stairwell wall are both damaged, as is an original painting that was staged at the bottom of the stairs. General liability insurance would likely cover damage to customers’ property like this.

Example 3: While visiting your company’s office, a customer slips on a wet floor and falls. They sustain a sprained wrist and concussion in the fall. General liability insurance would probably cover the cost of necessary medical care.

Other Types of Coverage Moving 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 moving companies should obtain.

Commercial Auto Insurance

Since you will be driving your truck on public roadways, you are mandated by the state to carry a commercial auto policy. Auto insurance protects not only your vehicle but any liability you may have in an accident. Your personal car insurance will not cover you if you are driving the company truck, even if you are off duty.

Commercial Property Insurance

If you own your location instead of renting, you need commercial property insurance to protect the building. If your business is based out of your home, your homeowners' insurance will not cover the home when it is being used for commercial purposes. Property insurance also covers items owned by your business.

Moving companies invest heavily in the equipment that is used to complete their work. Be sure that you have enough coverage to replace all equipment in case of loss. This coverage is generally offered in a Business Owner Policy (BOP).

In addition to the policies outlined above, there are a few other types of coverage your moving company may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.

Workers' Compensation Insurance

If your moving company has any employees (full-time or part-time), you are legally required to carry workers’ compensation insurance. This type of coverage will help compensate your employees in the case that they get injured on the job.

Read more about workers’ compensation insurance.

Business Interruption Insurance

In the event of a fire, flood, or other catastrophes, there is a good chance your business operations will be halted for some time. Business interruption coverage is designed to help you recoup a portion of the revenue your business would lose due to the inability to operate.

This type of insurance is typically included in a business owner’s policy.

Commercial Umbrella Insurance

Umbrella coverage allows you to extend above and beyond the standard limits of your other business insurance policies. If you are faced with a large lawsuit or other claim situation, there’s a possibility that the coverage limits of your standard policies will be insufficient. In this case, your umbrella policy will allow you to surpass these limits.

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, workers’ compensation insurance, and commercial auto insurance.

Read our Moving Company Insurance article for more info.

It’s possible to start a small-scale moving company with very little capital. A used moving truck may require a down payment of $2,000, while moving dollies, moving pads, moving boxes, packing and wrapping materials, furniture belts, and rope may cost another $2,000.

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

Moving companies have relatively low monthly overhead costs and can be run out of someone’s home at the beginning. A warehouse will be needed as the company grows.

Payroll and payroll taxes are the biggest expense, along with vehicle maintenance, insurance, and fuel. You will also need a phone service, a website, and a marketing plan.

Learn more about running a moving company.

In addition to making a profit on each move, many moving companies offer other services as well. These services can be billed based on hourly costs or miles logged.

Learn more about starting a moving company.

Moving companies help customers pack and transport their personal possessions, whether it’s across town or to another city or country. In addition to packing and moving regular items, moving companies can also help customers pack delicate and expensive items, such as pianos, that require more care.

Moving company owners can make significant profits, especially if they win contracts with local businesses. The number of services a moving company offers will have a direct effect on how much money it makes, and profits reinvested in the business will enable further growth.

Learn more about starting a moving company.