Should I Start an LLC for My Gas Station?

Starting a limited liability company (LLC) for your gas station 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 gas station, lawsuits can arise from things like customers’ vehicles becoming damaged on your premises (e.g., a gas leak that leads to an explosion, vandalism, etc.).

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

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

Do I Need an LLC for a Gas Station?

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 Gas Station

By starting an LLC for your gas station, 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.

Gas stations will benefit from liability protection because retail businesses, including gas stations, face the risk of product liability, workplace accidents, and financial data breaches.

Example 1: A gas leak causes an explosion at the station, resulting in damage to the property and injuries to customers. Should a lawsuit follow this and your business is found to be liable for damages, your personal assets will not be at risk.

Example 2: A customer's car is damaged while being fueled at the station, and the customer sues the business for compensation. Your personal assets will not be impacted if your business is held responsible for damages.

Example 3: A customer slips and falls on a wet floor at the gas station and sustains serious injuries. If the customer proceeds to sue and your business is held liable for damages, the burden of compensation will not be extended to your personal assets.

Example 4: An improperly installed gas pump malfunctions and spills fuel, which ends up igniting and damaging a customer's vehicle. You must pay damages to the customer as well as pay to fix the pump.

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 Gas Station

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 gas station 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

Gas stations 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?

Just like all other businesses, LLCs in the gas station industry need insurance. While limited liability protection shields the personal assets of LLC owners, insurance is necessary to safeguard the business's assets.

Common Situations Business Insurance May Cover for a Gas Station

Example 1: While in use, a pump malfunctions and spills fuel at no fault of the customer. The fuel ignites, quickly damaging multiple customers’ vehicles. General liability insurance would likely cover the vehicles’ damage.

Example 2: A customer slips on a patch of ice during winter while pumping fuel, and their wrist is fractured in the fall. General liability insurance would likely cover the injury.

Example 3: The hallway to the restroom is regularly used to store overstocked and recently delivered items in tall stacks. A customer who’s walking to the restroom bumps into these stacks and is injured when the products fall. General liability insurance would probably cover the customer’s injuries.

Example 4: General liability insurance may be required to obtain the permits necessary for a gas station.

Other Types of Coverage Gas Stations 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 gas stations should obtain:

Property Insurance

Gas stations normally need commercial property insurance for their building and pumps. Property insurance often also covers items that a business owns and keeps on its property.

Gas stations frequently have expensive build-outs because pumps must be carefully designed and installed. Make sure you have enough coverage to replace both your station’s building and its pumps.

This coverage is often available as part of a business owner’s policy (BOP).

Workers’ Compensation Insurance

Most gas stations need workers’ compensation insurance because they have employees. Workers' compensation covers work-related injuries and illnesses, and most states legally require businesses that employ workers to carry it.

Workers’ compensation insurance is usually purchased on its own.

Business Interruption Insurance

Running a gas station comes with many regular expenses, and bills don’t cease after a disaster. Should your gas station have to shut down following a disaster, business interruption insurance may help pay expenses while the gas station is closed and not bringing in revenue.

Business interruption insurance is widely available as part of a BOP.

Data Breach Insurance

Customers expect to be able to pay at the pump, but accepting card payments exposes a business to potential data breaches. Data breach insurance may provide coverage if customers’ payment information is stolen through skimmers or via another means.

Data breach insurance can be added to a business owner’s policy as an endorsement, as opposed to a stand-alone policy.

Commercial Umbrella Insurance

A gasoline-fueled fire can quickly cause substantial damage and injury, and resulting lawsuits tend to be expensive. Commercial umbrella insurance offers additional liability protection that might help cover expensive lawsuits like these (and others).

Commercial umbrella insurance can be added to some BOPs.

Liquor Liability Insurance

Though liquor laws and the insurance policies surrounding the sale of liquor vary based on location, liquor liability insurance may be needed to protect your assets if your gas station serves or sells alcohol.

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, workers’ compensation insurance, and commercial property insurance.

Read our Business Insurance for Gas Stations article for more info.

Starting a gas station business typically requires a significant amount of upfront investment, including legal fees, insurance premiums, state permits, promotional signage, initial inventory, and other costs associated with setting up a convenience store and gas station. Building costs can vary greatly, with estimates starting at $100,000.

Visit our How to Open a Gas Station guide to learn more about the costs of starting and maintaining this business.

Operating costs for gas stations include fuel purchases, other inventory, payroll, insurance, utilities, and permit fees.

Learn more about running a gas station.

Gas stations make a large percentage of their revenue selling gas, but sales of other items, such as food, alcohol, and lottery tickets, can also make up a sizable portion of revenue.

Learn more about starting a gas station.

A gas station is one type of business that is suitable for almost any area — urban, suburban, or rural. In addition to gas, gas stations also typically sell snacks, drinks, and sometimes full meals. This makes them a popular destination for travelers and people passing by that need to make a quick purchase.

Gas station owners can earn an average of around $70,000 per year.

Learn more about starting a gas station.