Should I Start an LLC for My Lawn Care Business?
Starting a limited liability company (LLC) for your lawn care 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 lawn care business, lawsuits can arise from things like damaging your customers’ property while working (e.g., wrecking a sprinkler system, etc.), employee and customer injuries, and business debt.
LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your lawn care business seem more credible.
Recommended: Use Northwest to form an LLC for $29 (plus state fees).
Do I Need an LLC for My Lawn Care 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 lawn care business could benefit from tax options and increased credibility.
LLC Benefits For a Lawn Care Business
By starting an LLC for your lawn care 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.
Lawn care businesses will benefit from liability protection because of the high risk associated with operating a lawn care service.
Example 1: When one of your employees accidentally wrecks a customer’s new sprinkler system, the customer demands that you compensate him immediately. When you refuse, he files a compensation lawsuit against your lawn care business. As an LLC owner, your personal assets will remain protected from the claimant, even if your business cannot compensate them.
Example 2: You acquire a business loan in order to expand your crew and purchase two new land mowers. After a significant fall in revenue, your business is unable to repay the loan back on time and begins to accrue debt. When you respond by firing one of your employees, you face a wrongful termination lawsuit, which could potentially exacerbate your business’s debt. As a result of your business’s LLC classification, your personal assets will remain protected from all creditors.
Example 3: When a client trips over one of your power cables and breaks their wrist, they file a medical damages lawsuit against your lawn care business. As a result of your limited liability in law, you will not have to personally compensate the claimant, regardless of how the lawsuit progresses in court.
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 lawn care 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 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
If a lawn care business owner believes they'll be paying themselves a reasonable salary and at least $10,000 in distributions each year, they might benefit from another LLC tax option, the S corporation (S corp) tax status.
S corp tax status for an LLC can help reduce self-employment and overall tax burden under the right circumstances.
Credibility and Consumer Trust
Lawn care businesses rely on consumer trust. Credibility plays a key role in creating and maintaining any business.
Businesses that form LLCs gain a level of consumer trust and credibility simply by forming an LLC.
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, choose your state from the list below to start an LLC yourself
Select Your State
- Alabama LLC
- Alaska LLC
- Arizona LLC
- Arkansas LLC
- California LLC
- Colorado LLC
- Connecticut LLC
- Delaware LLC
- Florida LLC
- Georgia LLC
- Hawaii LLC
- Idaho LLC
- Illinois LLC
- Indiana LLC
- Iowa LLC
- Kansas LLC
- Kentucky LLC
- Louisiana LLC
- Maine LLC
- Maryland LLC
- Massachusetts LLC
- Michigan LLC
- Minnesota LLC
- Mississippi LLC
- Missouri LLC
- Montana LLC
- Nebraska LLC
- Nevada LLC
- New Hampshire LLC
- New Jersey LLC
- New Mexico LLC
- New York LLC
- North Carolina LLC
- North Dakota LLC
- Ohio LLC
- Oklahoma LLC
- Oregon LLC
- Pennsylvania LLC
- Rhode Island LLC
- South Carolina LLC
- South Dakota LLC
- Tennessee LLC
- Texas LLC
- Utah LLC
- Vermont LLC
- Virginia LLC
- Washington LLC
- Washington D.C. LLC
- West Virginia LLC
- Wisconsin LLC
- Wyoming LLC
For most new business owners, the best state to form an LLC 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.
When it comes to a lawn care business, business insurance can protect your equipment (e.g., lawn mower, trimmer, etc.) from negligence claims or other torts.
Note: If you plan to hire employees for your lawn care business, you will be legally required to purchase workers’ compensation insurance.
Common Situations Business Insurance May Cover for a Lawn Care Business
Example 1: Your employees mix up the orders for two different jobs that day, spraying a client's garden and lawn with pesticides that ultimately damage the property. General liability insurance would probably help cover the damages owed or settlements reached in the event your business is found liable.
Example 2: At your business’s storage warehouse, an employee brings his friend along to check out the equipment. The friend messes around with the machinery, leading to a serious injury. If found liable, your business would probably be covered for damages through general liability insurance.
Example 3: A customer offers the use of his riding lawn mower, which your employees accept. A worker climbs in and accidentally drives the mower into an expensive fountain, damaging it as well as the mower. General liability insurance would likely be able to assist in covering damages owed by your business if found liable.
Other Types of Coverage Lawn Care 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 lawn care companies should obtain:
Commercial Auto Insurance
A lawn care business is necessarily mobile, and it usually owns a lot of equipment. This means you will almost certainly be using commercial vehicles to haul expensive tools and machinery to client homes and businesses. Insure your business’s vehicles with commercial auto insurance and get covered for accidents on the road, protecting your operation from surprise automotive repair expenses and accident suits.
Professional Liability Insurance
A business that provides care services should always carry a policy like this. Professional liability insurance provides coverage in the event that your business is charged with negligence or similar failures pertaining to the conduction of its duties. If your care service mismanages someone's lawn, they may sue for poor service/failed contractual obligations. Keep your company safe from potential customer dissatisfaction and the far-reaching financial consequences that it can entail.
Commercial Property Insurance
Your lawn care business will definitely require a collection of professional tools and other equipment to do its job. Of course, if that property is damaged by things like fire or violent weather, you can find yourself in big trouble. Keep your company insured with a commercial property insurance policy, and you can rest easy that any business equipment and owned real estate will be covered in the event of certain disasters.
In addition to the policies outlined above, there are a few other types of coverage your lawn care company 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.
Workers' Compensation Insurance
A big lawn care business will require workers to manage the incoming business from clients across your area of operation. Full-time and part-time employees legally require workers’ compensation insurance to keep them covered for on-the-job accidents and similar incidents. In the case of personal workplace injury, employees will be provided disability and even death benefits by a workers’ compensation policy, helping to provide for both employees and their families in times of hardship.
Should I Start an LLC FAQ
Which is better — LLC or sole proprietorship?
The better business structure depends on your business’s unique circumstances and needs. However, unless your business is low profit and low risk, an LLC is likely the better option.
What type of insurance should a lawn care business have?
At a minimum, you will need general liability insurance and commercial auto insurance.
Read our Business Insurance for Lawn Care Companies article for more information.
How much does it cost to start and maintain a lawn care business?
In order to start a lawn care business, you will need to purchase all of the equipment that you will need, including:
- Hand tools
- Leaf blower
You will also need a pickup truck lease and business license, as well as to hire staff (depending on the size of your lawn care business).
Visit our How to Start a Lawn Care Business guide to learn more about the costs of starting and maintaining this business.
What are the ongoing expenses of operating a lawn care business?
Operating expenses for a lawn care business include payroll, insurance, fuel, car payments, and marketing costs.
How do lawn care businesses make money?
Lawn care businesses make money by charging customers for lawn care services. This can be with a regular per-month or per-week rate, or you can charge per individual job.
Are lawn care services a lucrative business?
Between residential and commercial customers, there is always a demand for lawn care services. However, depending on the climate where you live and the services you offer, it is important to keep in mind that this business could be highly seasonal.
One advantage of starting a lawn care business is its relatively low startup costs. You can start small, without even having to rent any office space, and then grow over time as you gain more customers.