Should I Start an LLC for My Christmas Lights Installation Business?

Starting a limited liability company (LLC) for your Christmas lights installation 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 Christmas lights installation business, lawsuits can arise from things like an employee either getting injured while installing Christmas lights on a customer’s house or accidentally damaging a customer’s property.

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

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

Do I Need an LLC for a Christmas Lights Installation 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 Christmas Lights Installation Business

By starting an LLC for your Christmas lights installation 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.

Christmas lights installation businesses will benefit from liability protection because of the risks associated with working on client property. 

Example 1: When one of the contractors you work with damages your client's property, they become enraged and threaten to sue you unless you compensate them immediately. Since your business is registered as an LLC, you know that the unhappy customers will not be able to file a successful lawsuit against you personally and can only do so against your business. 

Example 2: You apply for a business loan with your bank in order to purchase additional equipment and finance your short-term labor costs. Assuming you don’t personally guarantee the loan, your personal assets will remain safe regardless of whether you are unable to pay the loan back in the future.

Example 3: When a large order of commercial-grade lights and other installation equipment doesn’t arrive on time, you refuse to pay for them, claiming they are no longer needed. Since you also refuse to return the equipment to the original seller, you find your business facing a compensation lawsuit. As a result of your limited liability in law, your personal assets will remain protected regardless of whether your business has to compensate the claimant or not. 

Example 4: While a technician is installing lights on a client’s roof, they accidentally cause damage to the roof that requires significant repairs. The client sues your business for the repair costs.

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 Christmas Lights Installation 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 Christmas lights installation 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

Christmas lights installation 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?

Since an LLC’s limited liability applies to its owners’ personal assets only, LLCs still must purchase insurance in order to protect their business’s assets (e.g., decoration equipment, transportation vehicles, etc.). 

Common Situations Business Insurance May Cover for a Christmas Lights Installation Business

Example 1: While setting up the Christmas lights in a client’s home, the technician activates the wrong wire and causes an electrical fire. General liability insurance will likely cover any property damage that may result from the accident.

Example 2: A technician accidentally leaves a bucket of tools in the middle of an outdoor walkway during the unveiling of a client’s light installation. This obstruction causes the client to trip, fall, and break their wrist. General liability insurance would likely cover the injuries and follow-up appointments.

Example 3: A local competitor believes that your logo too closely resembles their own. They sue you for copyright infringement as well as lost income. General liability will likely help cover the cost of either fighting the claim in court or settling outside of it.

Other Types of Coverage Christmas Lights Installation 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 Christmas lights installation business should obtain:

Professional Liability Insurance

Professional liability insurance is there in case you or your employees make a mistake or skip a step while on the job. No matter how skilled your technicians are, light installations will always be a hazardous line of work. This coverage is an extension of general liability insurance and provides specific coverage should your employees’ work cause major damage or physical injury to your clients.

Commercial Auto Insurance

Employees using their vehicles to get back and forth to clients’ homes will need commercial auto insurance to protect themselves, the vehicle, and other people on the road. Commercial auto insurance is likely to cover an at-fault accident, repairing any vehicles or property that may have been damaged. It will also cover the cost of treating bodily injuries.

In addition to the policies outlined above, there are a few other types of coverage your Christmas lights installation 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.

Home-Based Insurance

Because Christmas lights are a seasonal business, many owners will operate their business from their homes. Should a work-related accident or injury occur on the premises, homeowner’s or renter’s insurance might not cover the damages.

Should I Start an LLC FAQ

Which is better for my Christmas lights installation 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 a Christmas lights installation business need?

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

Read our Business Insurance for Christmas Lights Installation Businesses article for more info.

What are the costs to start and maintain a Christmas lights installation business?

In order to start a Christmas lights installation business, you may need to purchase:

  • Ladders
  • Commercial-grade lights and other installation equipment
  • A transportation vehicle: This can also be leased

When it comes to maintenance, you will need to factor in the cost of storing your equipment, as well as the cost of labor (if you hire employees to help you decorate).

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

What are the ongoing expenses of running a Christmas lights installation business?

Ongoing costs will include storage costs for the lights during off-season times of the year, employee wages, and replacement equipment costs.

Learn more about running a Christmas lights installation business.

How do Christmas lights installation businesses make money?

Profit is made by charging customers for the installation, service, and take-down of Christmas lights on the client’s home or business location.

Learn more about starting a Christmas lights installation business.

What is a Christmas lights installation business and is it profitable?

A Christmas lights installation business assists residential homes and professional businesses in putting up or taking down Christmas lights during the weeks surrounding the holiday season.

Christmas lights installation businesses have the potential to profit as much as $100,000 in a year. 

Learn more about starting a Christmas lights installation business.

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