Should I Start an LLC for My Bounty Hunter Business?

Starting a limited liability company (LLC) for your bounty hunter 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 bounty hunter business, lawsuits can arise from things like bodily harm claims, as well as from property and reputational damage.

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

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

Do I Need an LLC for a Bounty Hunter 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 Bounty Hunter Business

By starting an LLC for your bounty hunter 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.

Bounty hunter businesses will benefit from liability protection because of the risk of being sued for personal injuries, property damage, or the libel of other businesses.

Example 1: When searching for a wanted man, an employee at your bounty hunter business spots a person that appears identical to the bounty and thus tackles him with the intention of apprehending him. Unfortunately, the man was innocent and suffered a serious shoulder injury during the tackle. As a result, he sued for the bodily harm he alleges your business caused. Limited liability would ensure that only your business’s assets could be used to satisfy this compensation.

Example 2: In a similar mixup, another innocent man is tackled on the belief that he is wanted for a bounty. However, it is revealed that a laptop containing important documents was destroyed during the tackle, prompting the man to sue your company for the damage to his property. Here, you are precluded from being held personally responsible for any compensation the court may decide to award the plaintiff.

Example 3: Your bounty hunting business computer is hacked, and pictures of wanted people in the local area are circulated around social media. One man who has a similar appearance to one of the wanted men whose photo was leaked decides to sue your company, arguing that your negligence has severely negatively affected his reputation. Regardless of the claim’s validity, any compensation you might be found liable to pay would be limited insofar as the business’s assets.

Example 4: One of your bounties sues your company, citing misuse of force and improper use of handcuffs.

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 Bounty Hunter 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 bounty hunter 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

Bounty hunter 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?

LLCs need insurance like any other business, especially for bounty hunters. Insurance is needed by bounty hunter businesses in order to protect against the unique set of liabilities they face every day.

It is easy to assume LLCs do not need insurance because they already provide a form of asset protection. However, there is an important distinction here: LLCs provide protection for their owners’ personal assets, while insurance protects the business’s assets.

Common Situations Business Insurance May Cover for a Bounty Hunter Business

Example 1: One of your employees accidentally knocks a pedestrian down while in pursuit of someone. The pedestrian sues for repayment of his medical bills as well as damages from pain and suffering. General liability insurance should cover your legal fees and any damages awarded in a settlement (up to the limits of your policy).

Example 2: One of your bounties sues your company, citing misuse of force and improper use of handcuffs. General liability insurance would cover your legal fees as well as any damages awarded in a settlement.

Example 3: A bounty names your business and the county in a lawsuit, citing false arrest and slander. General liability insurance should cover any related legal fees and awarded damages.

Other Types of Coverage Bounty Hunter 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 bounty hunters should obtain.

Data Breach Insurance

As a bounty hunter, you store sensitive information regarding each of your bounties. If a hacker attacks your computer system and steals any of your data, you could face a lawsuit. Data breach insurance covers fees and damages associated with these situations — a coverage often excluded in general liability policies.

Professional Liability Insurance

Professional liability insurance protects your business if you or your employees make an error that results in a financial loss and/or lawsuit. Given the significant liability risks in this line of work, business owners should address any potential coverage gaps with their insurance professionals. Be sure to ask if your policy is claims-based or occurrence-based, as well as if it includes coverage for fugitive recovery, wrongful entry, wrongful seizure, abuse and molestation claims, and incidents involving concealed weapons.

Workers’ Compensation Insurance

You and your staff regularly encounter dangerous situations in pursuit of criminals, which sometimes result in on-the-job injuries. Workers’ compensation insurance, required by most states, protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover but also any disability or death benefits stemming from a work-related accident.

Bounty hunter business owners should consider carrying coverage above and beyond the legal minimum requirements, and you typically can purchase this as a standalone policy.

Commercial Auto Insurance

Any vehicle you use primarily for business requires commercial auto insurance to protect the vehicle, driver, and others on the road in the event of an accident. While most states regulate the minimum coverage required, this often leaves business owners exposed to potential lawsuits. Therefore, consider seeking the assistance of an insurance professional to help you determine the appropriate coverage limits for your business.

You can purchase commercial auto insurance as part of a business owner's policy (BOP) or as a standalone policy.

Commercial Umbrella Insurance

While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.

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 and commercial auto insurance.

Read our Bounty Hunter Business Insurance article for more info.

The startup cost of your bounty hunter business varies depending on the type of tools you prefer but is likely to be minimal. The main expense when starting out will out is your equipment, such as a pair of handcuffs or a taser.

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

Bounty hunter businesses have minimal ongoing expenses, such as repairing communications equipment, insurance, and travel.

Learn more about running a bounty hunter business.

A bounty hunter makes money for each fugitive they successfully capture.

Learn more about starting a bounty hunter business.

Bounty hunter businesses track down and turn in criminals, typically for bail bondsmen or families that have put up bail. A bounty hunter’s profits will depend on how many cases they take, and some do quite well.

Learn more about starting a bounty hunter business.