Should I Start an LLC for My Laundromat?

Starting a limited liability company (LLC) for your laundromat 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 laundromat, lawsuits can arise from things like a customer getting injured due to a defective machine or loose wiring, as well as from insurance disputes (assuming your laundry machines are insured).

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

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

Do I Need an LLC for a Laundromat?

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 Laundromat

By starting an LLC for your laundromat, 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.

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

Example 1: After a customer loses a finger as a result of a defective washing machine, they file a medical damages lawsuit against your laundromat. As an LLC owner, your limited liability in law will ensure that the claimant cannot sue you personally in order to be compensated if your business is unable to pay them.

Example 2: As a result of loose wiring, a customer suffers an electrical shock while using a washing machine in your laundromat. If they decide to file a lawsuit against your LLC, you will not be personally liable for any liability that arises as long as the loose wiring wasn’t a direct result of your own negligence.

Example 3: Your business acquires a small business loan in order to purchase additional washing machines as well as expand its advertising campaigns. Since you didn’t personally guarantee the loan, the lending party will not be able to sue you personally in order to be reimbursed if your laundromat business is unable to pay them in the future.

Example 4: An employee accidentally spills cleaning chemicals on a rack of recently cleaned, expensive clothing. The customers ask you to cover the replacement 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 Laundromat

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 laundromat 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

Laundromats 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?

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.

Laundromats come with several high-cost, high-risk pieces of equipment, making the need to purchase business insurance necessary.

Common Situations Business Insurance May Cover for a Laundromat

Example 1: One of your dryers develops an electrical issue without your knowledge. When a customer uses the dryer, he is shocked by the malfunctioning dryer and sustains injuries that require medical care. Your general liability insurance policy would cover the cost of the customer’s medical treatment.

Example 2: A customer slips on the wet floor of your bathroom and falls, causing injuries and leading them to file a lawsuit against your company. The general liability insurance you carry will pay for your legal costs, including a settlement, up to the limits of your policy.

Example 3: An employee accidentally spills cleaning chemicals on a rack of recently cleaned clothing. Many of the pieces were designer apparel from a frequent customer. Instead of needing to pay for replacing the clothing out of pocket, you can most likely get help covering replacement costs from your general liability policy.

Other Types of Coverage Laundromats 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 laundromats should obtain:

Commercial Property Insurance

Your laundromat is filled with expensive equipment, all of which is required for you to do business. In the event of a disaster, such as a fire, your equipment, as well as the building, could be damaged partially or completely. A commercial property insurance policy would provide financial assistance to help you replace your equipment up to your policy limits. Having the money on hand to get back up and running will ensure that you suffer minimal downtime.

Workers’ Compensation Insurance

Keeping up with customer demand requires having employees, and having employees requires carrying workers’ compensation insurance. Not only is workers’ compensation required by law, but it also ensures that you can take care of your employees if they are injured doing work-related tasks. Your workers’ compensation policy will cover the costs of treating work injuries and the cost of helping to pay lost wages while the employee recovers.

Commercial Auto Insurance

If you have one or more vehicles you use primarily for business, you need commercial auto insurance. Your commercial auto policy works much like your personal auto policy by helping to cover costs related to accidents in company vehicles. Coverage will help pay for medical bills for any injured parties as well as the repair or replacement of company vehicles.

Commercial Umbrella Insurance

When the policy limits of your general liability policy are exceeded, a commercial umbrella insurance policy will take over. Most businesses do not have the cash on hand to cover extra liability costs—like those stemming from a lawsuit—which is why commercial umbrella insurance can prove so beneficial.

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 property insurance.

Read our Laundromat Business Insurance article for more info.

It can cost you anywhere between $100,000 and $200,000 to start a laundromat, depending on your location. If you choose to purchase an existing laundromat business, it can cost you over $1 million.

A large cost will be the washing machines, which can cost anywhere between $500 to $20,000 per machine depending on the quality and whether they are top loaders or front loaders.

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

Some of the main operating costs for a laundromat are utilities, rent, and machine maintenance.

Learn more about running a laundromat.

Laundromats charge customers to use washing machines and dryers, and they can also provide full-service laundry packages.

Learn more about starting a laundromat.

Many people, especially in urban areas, live in apartments or houses that do not have a washing machine or dryer. Because of this, there is a big demand for commercial laundromats.

Between buying the equipment and renting the space, the startup costs for a laundromat can be significant. But profits can be substantial, especially if you are in an area with low utility costs.

Profit margins for successful laundromats can vary widely, typically from about 10% to 30%.

Learn more about starting a laundromat.