What are the costs to start and maintain a used tire business?

In order to start a used tire business, you will need to invest in: Leasing or purchasing a space to use as a retail location Purchasing equipment for the installation of tires Purchasing the used tires that you will be selling Your largest maintenance costs will likely be utilities, rent, inventory, and labor. Visit our How to Start a Used Tire Business guide to learn more about the costs of starting and maintaining this business.

Should I Start an LLC for My Used Tire Business?

Starting a limited liability company (LLC) for your used tire 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 used tire business, lawsuits can arise from things like negligently causing traffic accidents (e.g., by installing faulty products, installing a tire incorrectly, etc.), or accidently damaging customers’ vehicles.

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

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

Do I Need an LLC for a Used Tire Business?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form 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 Used Tire Business

By starting an LLC for your used tire 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.

Used tire businesses will benefit from liability protection because of the risk of product liability, trademark infringement, property damage to customers’ cars, and workplace accidents.

Example 1: When one of your employees accidentally installs a used tire incorrectly, a customer alleges that it fell out while they were driving, resulting in a small traffic accident. As a result, they file a lawsuit against your LLC, seeking compensation. Assuming you had done everything in your power to ensure that your employee was qualified and taking reasonable care whilst working, your personal assets will remain shielded from the claimant as a result of your limited liability in law.

Example 2: You apply for a business loan in order to purchase additional tires and hire a staff manager to help you run your LLC. Since you didn’t personally guarantee the loan during its application, the lending party will not be able to sue you in order to recoup their investment if your business is unable to reimburse them in the future.

Example 3: After leaving your used tire store, a client alleges a ripped tire was installed in their vehicle. You respond by letting them know that all tires are checked thoroughly before installation and refuse to offer any sort of compensation. If a lawsuit was to arise, the claimant would not be able to sue you personally in order to get compensated, regardless of how the lawsuit progressed.

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 Used Tire 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 used tire 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

Used tire 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.

As a used tire business owner, business insurance can protect your LLC’s assets (e.g., used tires, company vehicles, storefront, etc.) from any liability that may arise as a result of you or an employee accidentally installing a tire incorrectly.

You can also use business insurance to replace and maintain your tires and all other company equipment through a commercial property insurance policy.

Common Situations Business Insurance May Cover for a Used Tire Business

Example 1: While retrieving a tire from a tall stack, one of your employees drops it down the ladder. It rolls out of the garage and into traffic, causing a car wreck in which two people are injured. If found liable in court, your company would probably be covered for some of the ordered payments and/or settlements related to car repair and medical fees.

Example 2: An employee drives a customer vehicle into your business's garage. Unfamiliar with the car, he accidentally rams it into the side of a steel insert, badly denting and scuffing the front fender of the customer's car. General liability insurance would probably be able to cover your business in the event it is found liable for this damage.

Example 3: A customer prefers to stand nearby and watch as your employees replace the tires on his old car. The parking brake is worn down, and the vehicle rolls backward onto the customer's foot, breaking several of his toes. If your business is found liable, general liability insurance would probably provide coverage for court-ordered payments or a settlement.

Other Types of Coverage Used Tire 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 used tire stores should obtain:

Product Liability Insurance

As a used tire business, you will be selling products that customers depend on to get around at high speeds. If a tire pops or a vehicle slips on an icy road, you could be found liable for any resulting damages to involved people and vehicles. Product liability insurance is designed to cover damages resulting from any products your company sells.

Commercial Property Insurance

This policy protects companies from serious losses in the event that their owned real estate, equipment, tools, or products are damaged or destroyed by factors like fire and extreme weather. Particularly since tires are flammable, this is a must-have policy for a used tire business that houses large quantities of their chief product. Commercial property insurance is also invaluable for providing coverage for related equipment and tools for tire changing and similar automotive fixes.

Business Interruption Insurance

If your business does suffer losses due to fires or various similarly destructive forces, this policy is a major plus in the effort to restore interrupted services. Business interruption insurance can help cover estimated losses in revenue during a temporary shutdown. If your used tire store is forced to go dormant for a little while, this policy can also cover rebuilding, relocation, and training costs for new workers learning to operate professional machinery. Protect your company during unexpected interruptions with business interruption insurance.

Commercial Auto Insurance

Tire shops may offer mobile automotive repairs or use commercial vehicles to pick up parts from a local vendor. If this is the case, a tire shop would be well advised to obtain commercial auto insurance. Any vehicle must be insured so long as it drives on public roads. With this policy, your commercial vehicles and any incurred medical expenses can be covered in the event of auto accidents.

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 property insurance.

Read our Used Tire Store Insurance article for more info

In order to start a used tire business, you will need to invest in:

Leasing or purchasing a space to use as a retail location
Purchasing equipment for the installation of tires
Purchasing the used tires that you will be selling

Your largest maintenance costs will likely be utilities, rent, inventory, and labor.

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

Some of the main operating expenses for a used tire business are inventory, payroll, and rent.

Learn more about running a used tire business.

Used tire businesses make money by buying used tires at wholesale prices and then reselling them to the public.

Learn more about starting a used tire business.

Startup costs for a used tire business can be kept fairly low, as the business doesn’t require a fancy retail space, and used tires purchased wholesale can be bought pretty cheaply. This can lead to impressive profits if you sell enough tires.

Learn more about starting a used tire business.