Should I Start an LLC for My Fence Company?

Starting a limited liability company (LLC) for your fence company 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 fence company, lawsuits can arise from things like indemnification claims or refund requests (e.g., as a result of an employee installing a fence incorrectly, damaging an adjacent land’s property, etc.).

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

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

Do I Need an LLC for a Fence Company?

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

You should start 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 Fence Company

By starting an LLC for your fence company, 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.

Fence companies will benefit from liability protection because land and home improvement businesses, including fence companies, face a number of financial risks associated with entering the client’s property for installation, as well as the safety of customers in relation to the installation of the fence.

Example 1: You are working on a project installing a fence for a customer, but the project is not completed correctly. The customer sues your business for negligence and seeks to recover damages associated with the faulty installation. With an LLC structure in place, your personal assets are protected from being used to pay any legal costs or liabilities.

Example 2: An employee of your fence company accidentally damages a customer’s property while installing the fence. The customer files a lawsuit against you for compensation for the loss of their personal assets. With an LLC structure, your personal assets are shielded from legal action.

Example 3: You own a large fence company, and your financial records are compromised in a data breach. Customers who have purchased fences from you file a lawsuit against your business for compensation due to the loss of their personal information. In this scenario, an LLC structure will protect your personal assets from the lawsuit’s fines.

Example 4: After improperly installing a client’s electrical gate, the gate malfunctions and injures the customer’s leg, leading to expensive medical costs that your business becomes liable to cover.

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 Fence Company

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 fence company 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

Fence companies 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 dependable 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.

Fence companies need business insurance to protect them from potential liability in the event of property damage, theft, and other unfortunate circumstances that could lead to a lawsuit.

Common Situations Business Insurance May Cover for a Fence Company

Example 1: An electronic gate malfunctions and closes too fast, injuring the customer’s leg. General liability insurance may cover any medical expenses and legal fees associated with the incident, whether the gate was improperly installed or simply malfunctioned.

Example 2: The homeowner decides to step in and help build the fence. Upon picking up the tool and attempting to use it, they severely injure their back. Your general liability insurance policy may cover the accidental injury to the non-employee. If the claim is approved, your insurance would help pay for any expenses related to treating the injury and/or any lawsuits that arose from the incident.

Example 3: While constructing a fence for a client, a piece of equipment or material flies over the fence and damages a neighbor’s property. Your general liability insurance may cover the cost of repairing the damage. If the neighbor decides to sue, it may also cover any legal costs and judgments or settlements related to the case.

Other Types of Coverage Fence 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 fence companies should obtain:

Commercial Auto Insurance

Commercial auto insurance helps protect you against financial loss if your work vehicle is damaged in an accident or if you hit another vehicle or object while driving your work vehicle for business purposes. If you are found to be the at-fault driver, this type of insurance may pay for the repairs and/or replacement of your work vehicle, any personal injuries to you, the other driver, or passengers, and any damage to the other person’s vehicle or property.

Commercial Umbrella Insurance

Commercial insurance policies don’t always cover the entire cost of an incident or accident. When this happens, you need commercial umbrella insurance, which covers the remainder of the costs associated with the accident or incident.

Workers’ Compensation Insurance

Occasionally, your employees may experience injuries on the job, like a back injury, a bad cut, or a slip and fall. Workers’ compensation helps pay for the medical costs associated with treating the injury.

Business Owner’s Policy

Business owner’s policies (BOPs), if they are available in your area, combine general liability insurance, property owner’s insurance, and potentially other types into one policy.

Commercial Property Insurance

Commercial property insurance is a good idea for any fencing installer that stores their equipment and materials at a brick-and-mortar commercial location. These types of policies cover damage to the building and stored equipment that is the result of weather damage, fire, and vandalism.

Employee Dishonesty Coverage

Employee dishonesty coverage covers employee theft of materials, equipment, money, and other items from your place of business or the worksite.

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 Business Insurance article for more info.

Opening expenses for a fence-building business include licenses, insurance, and surety bonds. You’ll also need equipment such as post drivers, drills, and an extended-bed truck for delivering materials. Depending on local zoning laws, you may be able to use your home for office space and equipment storage.

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

Some ongoing expenses for your fence company might include vehicle and equipment maintenance, gas costs, storage and shipping fees, inventory, and employee payroll.

Learn more about running a fence company.

Fence companies make money by charging customers the cost of fence materials and labor used for the design and installation of custom fence solutions.

Learn more about starting a fence company.

Fence companies install fences for a variety of residential and business properties looking for increased security or adherence to local land ordinances.

Depending on the size, location, materials used, and difficulty of the project, these projects can vary in cost to the consumer. Additionally, the amount of time and labor that will be required to tackle the project plays a role in the consumer’s cost. Fence installation companies profit an average of $32,000 a year.

Learn more about starting a fence company.