Should I Start an LLC for My Marina?

Starting a limited liability company (LLC) for your marina 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 marina, lawsuits can arise from things like neighbors claiming the noise pollution of your pressure washers is a public nuisance or accidentally damaging a client’s ship while trying to inspect it.

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

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

Do I Need an LLC for a Marina?

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 Marina

By starting an LLC for your marina, 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.

Marinas will benefit from liability protection because boat and nautical service businesses face a variety of risks associated with the safety of the boater’s property while the boats are in the marina’s care. Additionally, marinas face risks associated with the safety of boaters while on their physical property.

Example 1: Your marina is situated close to a block of residential apartments. Residents file a lawsuit against you, claiming that the noise from your pressure washers is constituting a public nuisance and affecting the conducive study time of their children. Should the court find your business guilty, only the business’s assets will be used in providing compensation.

Example 2: A river cruise company brings one of its ships to your marina for repairs and Coast Guard inspection. During the inspection, negligence by your employee leads to grave damages, and the cruise company sues you. Liability protection will ensure your personal assets are not affected by any fees or compensation associated with the lawsuit.

Example 3: A high-profile client docks his yacht at your marina temporarily. Upon his return, he claims that certain rare artworks are missing and sues your company for the loss of property. As long as your business operates as an LLC, your personal assets will remain protected from any damages associated with the lawsuit.

Example 4: While doing maintenance on a dock, an employee accidentally damages a nearby boat. The boat’s owner asks that you cover the repair 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 Marina

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 marina 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

Marinas 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.

Starting and maintaining a marina requires a significant amount of assets and an equally significant amount of risks. Purchasing various business insurance policies can help protect your marina in the event of marina damage, customer property damage, and more.

Common Situations Business Insurance May Cover for a Marina

Example 1: As a visitor rushes to her boat, she slips and breaks an arm. She demands you pay for her medical treatment because you did not display any warning about the slippery surface. General liability insurance would cover her medical bills.

Example 2: While filming a promotional video, an employee’s camera equipment starts an electrical fire that ultimately burns several boats. General liability insurance would cover the cost to repair or replace your customers’ boats.

Example 3: As an employee pushes a dolly filled with cleaning supplies around a corner, she accidentally hits a visitor. The resulting fall breaks the visitor’s tailbone, and he decides to sue. General liability insurance would pay for your legal fees and any damages awarded in a settlement.

Other Types of Coverage Marinas 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 marinas should obtain:

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 Property Insurance

You’ve made major investments in the equipment needed to run your marina. Commercial property insurance would cover the cost of replacing that equipment after a fire or other natural disaster so your business can recover quickly.

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.

Business Interruption Insurance

If a fire, tornado, or other incident forces you to temporarily close, business interruption insurance would help cover your financial losses until you can reopen. You can usually purchase business interruption insurance as part of a business owner policy or BOP.

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 Marinas article for more info.

Building a marina from scratch requires sizeable startup capital. The greatest initial expense is the installation of wet slips. You should also factor in the costs of diverse equipment, on-site storage, office buildings, and insurance.

Alternatively, you may prefer to buy an established marina as this would reduce the lengthy process of obtaining necessary permits and licenses. Still, costs would run into several millions of dollars.

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

The main ongoing expenses will include the cost of maintenance, employee wages, and licensing fees.

Learn more about running a marina.

Profit is generated by charging docking fees to guests, typically by how long they are hoping to stay and the size of their boat. Other profits can be made through the sale of boating supplies and equipment including fuel.

Learn more about starting a marina.

Marinas offer a place for boats to park during boat season and various times of the year. Some boats only need a place to park for a few days, while other types of boats stay in the water year-round.

Since marinas are relatively seasonal in nature, profit is limited to the times of the year you can stay open. This could mean profit as much as tens of thousands or more per year depending on the seasonal weather.

Learn more about starting a marina.