Should I Start an LLC for My Junk Removal Business?

Starting a limited liability company (LLC) for your junk removal 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 junk removal business, lawsuits can arise from several different factors, including accidentally damaging a customer’s car or furniture while removing junk from their home.

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

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

Do I Need an LLC for a Junk Removal Business?

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 Junk Removal Business

By starting an LLC for your junk removal 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.

Junk removal businesses will benefit from liability protection because of the risk of trademark infringement, property damage, and workplace accidents.

Example 1: While removing some furniture from a client’s living room, one of your employees falls onto your client’s new TV, completely shuttering it. If the client was to file a compensation claim against your LLC, your personal assets would remain 100% protected as long as it wasn’t your own negligence that caused the claimant financial harm.

Example 2: After a fall in revenue, you realize that you will not be able to pay all of your employees’ salaries this month. If a breach of contract lawsuit arises, the claimant(s) would not be able to sue you personally in order to seek compensation as a result of your business’s LLC status.

Example 3: You apply for a small business loan in order to purchase a new track for your junk removal business. Since you didn’t personally guarantee the loan during its application, the lending party will not be able to sue you personally in order to get their money back if your LLC is unable to pay them back in the future.

Example 4: An employee loads a company truck with a customer’s junk but fails to properly shut the truck. As they are driving down the road, the junk falls out and damages a car. The car’s owner asks you to cover the cost of the needed repairs.

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 Junk Removal 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 junk removal 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

Junk removal 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?

As an LLC owner, you will need to purchase business insurance in order to protect your LLC’s assets (e.g., truck, cleaning equipment, etc.).

This is because limited liability protects your own assets only, not the business’s. Limited liability also fails to protect your own assets against tort or negligence claims that you are personally responsible for.

Common Situations Business Insurance May Cover for a Junk Removal Business

Example 1: While on a removal job in a client’s home, one of your employees accidentally drops a box of heavy junk on the client’s foot. If held liable for the client’s injuries, your business would probably have some coverage under a general liability insurance policy for damages incurred or a settlement reached outside of court.

Example 2: An employee knocks over a water bottle during a junk removal session in a client’s home. The client slips on the spilled water and breaks her hip in several places. If you were found liable, general liability insurance would probably help cover some of the damages or any settlement reached between your business and the client.

Example 3: One of your employees likes to make small talk with clients during jobs. He spreads stories about a competitor’s removal business, and the competitor gets wind of this. You are targeted with a lawsuit for slander. General liability insurance would likely cover legal costs related to the incident.

Other Types of Coverage Junk Removal 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 junk removal businesses should obtain:

Commercial Auto Insurance

A motor vehicle used for commercial purposes must be covered by auto insurance. Junk removal businesses will undoubtedly require trucks or other vehicles for the physical junk removal process. Commercial auto insurance will provide your business coverage in the event of auto accidents.

Workers’ Compensation Insurance

In most states, you are legally required to cover part-time and full-time employees with a workers’ compensation insurance policy. This allows coverage for any worker who is injured on the job, protecting your business from losses from employee lawsuits and helping to assure compensation for injured workers. Disability and death benefits are also provided through workers’ compensation policies.

In addition to the policies outlined above, there are a few other types of coverage your junk removal 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.

Commercial Property Insurance

If your junk removal business’ equipment, tools, resources, or commercial vehicles are damaged by disasters like fires or violent weather, a commercial property policy can provide coverage. This can save your business from drastic losses and steep costs of reinvestment.

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 auto insurance.

Read our Junk Removal Business Insurance article for more info.

In order to start a junk removal business, you will need to purchase:

A large truck or van
Basic tools and cleaning supplies
A location for sorting

When it comes to your ongoing expenses, you will need to consider the costs of labor (if applicable), business insurance, and advertising.

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

Operating expenses for a junk removal business include vehicle costs, insurance, payroll, and rent for a space to sort the junk.

Learn more about running a junk removal business.

A junk removal business makes money by charging customers to haul away junk and other items.

Learn more about starting a junk removal business.

Junk removal businesses provide a convenient solution for people that need to get rid of trash, broken items, and more.

One good thing about owning a junk removal business is that it is easily scalable. You can start small with just one truck and then add more as you can afford to. A single truck could bring in between $500 and $1,500 in a day.

Learn more about starting a junk removal business.