Should I Start an LLC for My ATM Business?

Starting a limited liability company (LLC) for your ATM 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 an ATM business, lawsuits can arise from things like EFTA violations or a customer’s debit card getting stuck in one of your ATMs for a prolonged period of time.

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

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

Do I Need an LLC for an ATM 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 an ATM Business

By starting an LLC for your ATM 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.

ATM businesses will benefit from liability protection, as they face the risk of product liability, trademark infringement, and financial data breaches.

Example 1: A customer claims that one of your ATMs did not disclose all of the fees that she was required to pay on screen. After realizing that this is a legal requirement in accordance with the Electronic Fund Transfer Act, she threatens to sue your LLC. Here, limited liability will ensure that — regardless of the outcome of the lawsuit — your personal assets are out of bounds. 

Example 2: You decide to take on a business loan of $30,000 in an attempt to purchase additional ATMs. When you end up struggling to pay back the loan on time, your business starts accruing significant debt. Since it’s registered as an LLC, you know that your personal assets will remain safe regardless of whether your business pays back the debt as long as you didn’t personally guarantee the loan. 

Example 3: A customer’s debit card gets stuck in one of your ATMs, which later gets misappropriated by another customer. Since this is a result of your ATM’s malfunction, a lawsuit is filed against your LLC by the owner of the first debit card, who is seeking compensation. Limited liability will protect your personal assets if a court finds that your company is required to reimburse the claimant. 

Example 4: Someone installs a skimming device on one of your ATMs and steals customers’ debit card numbers. Even though you had nothing to do with the scam, some customers sue your business for damages.

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 an ATM 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 an ATM 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

ATM 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 loansgrants, 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?

If you do not have employees, you will likely not be legally required to own business insurance, although this can depend on your industry. 

Having said that, purchasing general business insurance is always recommended if your business has valuable assets, regardless of whether you register as an LLC. 

Note: The limited liability offered by an LLC structure does not protect a business’s assets, only its owners’.

Common Situations That General Liability Insurance May Cover for an ATM Business

Example 1: As you are removing an old ATM and replacing it with a new one, you lose control of the dolly and drop the ATM on the liquor shelves at a convenience store. The general liability policy would likely cover the replacement cost for the owner’s property.

Example 2: An ATM malfunctions and the person using the machine reaches into the cash dispenser to try and get his money. His hand gets stuck and he sustains an injury. The general liability insurance would likely cover the cost of treating the injury.

Example 3: Many of the property owners where you place ATMs may require you to carry general liability insurance before they will work with you. Having a policy will ensure that you can meet these requirements and serve as many locations as possible.

Other Types of Coverage ATM 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 ATM businesses should obtain: 

Commercial Auto Insurance

Maintaining ATM machines requires you and/or your employees to spend considerable time on the road. All vehicles that are used for business purposes are required to be covered by commercial auto insurance. Your commercial auto insurance policy will help to protect your company vehicles, employees, and others on the road. 

Commercial Property Insurance

The tools you use to maintain your ATMs and the facility you keep to store your machines can be expensive to repair or replace—such as in the event of a fire. Commercial property insurance is designed to help you cover the costs of repair and replacement when your commercial property is damaged or destroyed.

In addition to the policies outlined above, there are a few other types of coverage your ATM business 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 you have any employees helping with your ATM business, workers’ compensation insurance will most likely be required by the laws of your state. When an employee gets hurt on the job and is unable to work, this type of insurance will cover the costs of helping the employee. Workers’ compensation not only helps you adhere to state law, but it also ensures that you do not have to pay expensive medical bills for employees hurt on the job out of pocket.

Crime Insurance

Your employees may be tempted to act in a criminal manner to take advantage of your ATM business. While you can do your best to hire honest employees and implement proper security measures, you cannot guarantee that you will not be the victim of crime. Crime insurance will likely help to cover some of the costs associated with such crimes, helping you to recover more quickly and get back to doing business.

Should I Start an LLC FAQ

Which is better for my ATM business — an LLC or sole proprietorship?

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.

What type of insurance does an ATM business need?

At a minimum, you’ll need general liability insurance and commercial property insurance.

Read our Business Insurance for ATM Businesses article for more info.

What are the costs to start and maintain an ATM business?

The total startup cost for an ATM business will depend how many ATM machines you purchase. 

These can cost anywhere between $3,000 and $10,000 depending on the type. You will also need a bag of transporting cash and business insurance. 

Most machines require a minimum of $2,000 of cash per week. Merchants can also require commission depending on the contracts that you’ll have in place with them.

Visit our How to Start an ATM Business guide to learn more about the costs of starting and maintaining this business.

What are the ongoing expenses of running an ATM business?

The main operating expense for an ATM business is stocking the machines with cash.

Learn more about running an ATM business.

How do ATM businesses make money?

ATM businesses make money by charging a fee for each transaction and a rental fee for the machines.

Learn more about starting an ATM business.

Is an ATM business lucrative?

Even as digital payments become more common, there are still times when people need cash. ATM owners can take advantage of this by strategically placing ATMs where they might be needed, as fewer people carry around cash with them.

One advantage of an ATM business is that it is easily scalable. If you want, you can start with a small number of ATMs to keep startup costs low and then add more as you can afford to.

Learn more about starting an ATM business.

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