Should I Start an LLC for My Limo Service?

Starting a limited liability company (LLC) for your limousine 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 limousine company, lawsuits can arise from things like injuries suffered by passengers or third parties due to an accident involving a limousine from your fleet.

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

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

Do I Need an LLC for a Limo Service?

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 Limo Service

By starting an LLC for your limo service, 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.

Limo services will benefit from liability protection because private driving service businesses face a number of risks associated with the safety of clients and drivers as well as the potential for significant property damage.

Example 1: You operate a limousine company and recently rented a new luxury vehicle to use for weddings, corporate events, and other special occasions. Unfortunately, the car is damaged in an accident while transporting a client across town. As the owner of the LLC, limited liability protects your personal assets from any potential lawsuits related to this incident.

Example 2: As the owner of a limousine company, you are often required to store and manage large amounts of financial data for your clients. If this data is accidentally leaked or hacked, limited liability will protect your personal assets from any legal action that may stem from this breach.

Example 3: As the owner of a limousine company, you are always at risk of workplace accidents involving your drivers and vehicles. If an accident occurs while your limousine is being operated, the LLC will be held liable for any damages or personal injuries incurred, protecting your personal assets from litigation.

Example 4: While you hold the door open for a client who is getting into the limo, you accidentally slam the door on the client’s hand and injure them. The client sues you for the resulting medical expenses.

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 Limo Service

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 limo service 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.

For questions about tax solutions for your limo service, we recommend scheduling a free tax consultation.

Credibility and Consumer Trust

Limo services 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.

Limousine companies need insurance to protect themselves from financial liabilities that can arise from accidents, damage to vehicles, and legal repercussions. Liability insurance covers any third-party bodily injury or property damages that may occur as a result of company negligence.

Common Situations Business Insurance May Cover for a Limousine Company

Example 1: During a tour of your facilities, a potential client trips and breaks an arm. He asks you to pay for his medical treatment. General liability insurance would cover the client’s medical bills.

Example 2: While running late for a pickup, a driver forgets a client’s luggage on the side of the road. A passing truck runs over the fallen luggage, which contains expensive jewelry. General liability insurance would cover the cost to repair or replace the client’s damaged property.

Example 3: After holding the car door open for a client, you close the door too soon and accidentally injure the client’s hand. The client decides to file a lawsuit. General liability insurance would cover your legal fees and any damages awarded in a settlement.

Other Types of Coverage Limousine 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 limousine companies should obtain:

Commercial Auto Insurance

Because your business focuses on transportation, a commercial auto insurance policy is essential. Any vehicle you use primarily for business requires this coverage. Your policy will protect your vehicles, drivers, and others on the road in the event of an accident by covering any related vehicle repair costs as well as medical treatment for anyone injured.

Workers’ Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover, but also any disability benefits stemming from a work-related accident.

Commercial Umbrella Insurance

While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.

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, commercial auto insurance, and commercial property insurance.

Read our Business Insurance for Limousine Companies article for more info.

To start a limousine business, you need to budget about $50,000 to $100,000 to acquire a fancy new limousine. You’ll also need to budget for insurance for the vehicle, advertising costs for your business and storage space to secure your limousine.

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

Ongoing expenses will include the cost of keeping your vehicles in storage, the maintenance and repair of vehicles, and employee wages.

Learn more about running a limo service.

Limo businesses make money by charging customers to be chauffeured for certain fixed rates and periods of time.

Learn more about starting a limo service.

Limo services provide limousine transportation for customers. These services are often reserved for special events such as weddings, school dances, and other party events.

Limo businesses have the potential to make extremely high earnings, with the industry bringing in several billion dollars in annual revenue.

Learn more about starting a limo service.