Last Updated: May 10, 2024, 12:16 pm by TRUiC Team

Should I Start an LLC for My Call Center?

Starting a limited liability company (LLC) for your call center 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 call center, lawsuits can arise from things like employees violating the Telephone Consumer Protection Act (such as by making unsolicited telemarketing calls or communication to customers).

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

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

People working in a call center

Do I Need an LLC for a Call Center?

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 Call Center

By starting an LLC for your call center, 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.

Call centers will benefit from liability protection because any business with a physical location, including call centers, faces a variety of liability issues related to employees and clients visiting the business location. There is also the potential risk of becoming liable for copyright or trademark infringement with other competitors who bring forward legal claims. 

Example 1: Your call center took out a business loan for expanding the office but has missed payments leading to repossession of assets. Being an LLC, limited liability ensures that your own personal assets could not be seized, only those from the call center could be taken as collateral.

Example 2: A company you handle quality assurance and support calls for is attempting to sue you, claiming your center is offering poor assistance leading to customer dissatisfaction. The limited liability offered by an LLC can protect you and your assets should the matter escalate to a court setting.

Example 3: One of your client companies is being taken to court over a leak of customers’ private information. Your call center would be protected by the limited liability of an LLC as you can not be held accountable for compensation owed to the customers.

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 Call Center

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 call center 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

Call centers 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).

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 limited liability protection from being an LLC protects your personal assets, not your business assets. 

Having insurance will protect your equipment and employees from accidents and damage, helping pay for medical expenses and damage.

Common Situations Business Insurance May Cover for a Call Center

Example 1: A client is visiting your call center. He is on his way to the restroom when he trips over a box left in the walkway. He breaks his wrist and asks that you pay for his medical treatment. Your general liability insurance will likely cover this expense.

Example 2: One of your competitors has determined that your latest marketing campaign libeled his business. You are fairly certain that you did not commit libel, but you know that you need an attorney to defend your business regardless. Your general liability insurance policy will pay for your legal defense fees.

Example 3: A visitor to your call center is coming in from the parking lot when she slips on some ice and breaks her hip. She sues your business, claiming you should have kept the area free of ice. Your general liability insurance will pay for your legal fees, including the cost of a settlement if one is required.

Other Types of Coverage Call Centers 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 call centers should obtain.

Worker’s Compensation Insurance

When you have employees, you need workers’ compensation insurance to protect them in the event that they are injured performing job-related duties. Your state likely requires that you carry workers’ comp if you are an employer. As long as you are carrying a policy, your employees can get medical treatment for their work-related injuries and assistance with lost wages while recovering.

Commercial Property Insurance

You have invested a significant amount of capital in the equipment that you use to operate your call center. If you were to lose it in an unexpected event, like a fire, you might find it difficult financially to replace it. With commercial property insurance, you can file a claim and get help from your insurer with replacement costs as long as the loss was caused by a covered event.

Commercial Umbrella Insurance

A commercial umbrella insurance policy is designed to protect your business if the limits of your general liability insurance are exceeded. This can happen in certain situations, like if you lose a major lawsuit. When the limits of your general liability insurance are exceeded, the umbrella policy will kick in and pay until its limits are reached.

Professional Liability Insurance

Professional liability insurance protects your business from negligence claims related to mistakes or failure to perform. If one of your clients decides to sue you based on mistakes your business made, your policy will pay for your legal defense fees, including paying settlements if they are required.

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.

Starting a call center can be quite expensive. Certain states require a license to operate which costs a maximum of $400.

You may also want to convert an existing retail space into your call center. Doing so can save you more money on rent but typically costs more in workspaces due to the need to convert spaces that weren’t intended for this purpose.

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

The majority of spending will take place when the business is formed. However, some ongoing costs will include employee salaries, general office equipment purchases, utilities and rent, and upgrading equipment.

Learn more about running a call center.

Call centers are hired on behalf of clients, and charge their clients to conduct customer service initiatives, charging by the phone call made or hours worked on behalf of the client.

Learn more about starting a call center.

Call centers are often hired by businesses looking to solve customer service-related issues without hiring an entire department of individuals. They are typically comprised of a number of employees that allow the business to focus on one client at a time or many clients at the same time.

Call centers, with well-established, repeat clients, have the potential of profiting over a million dollars in a year.

Learn more about starting a call center.

Related Articles

Article Sources

IRS: Limited Liability Company

IRS: S Corporations


SBA: Small Business Guide

SBA: Choose a Business Structure Guide

US Census Bureau: Small Business Statistics

SBA Office of Advocacy: Data on Small Business

FRED: SBA Data for Small Business