Do I Need an LLC for My Mobile Oil Change Business?

Starting a limited liability company (LLC) for your mobile oil change 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 mobile oil change business, lawsuits can arise from things like damaging a customer’s property during an oil change or accruing debt with a local bank that you are unable to repay.

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

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

Should I Start an LLC for My Mobile Oil Change 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 Mobile Oil Change Business

By starting an LLC for your mobile oil change 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.

Mobile oil change businesses will benefit from liability protection because of the risk of being sued for personal injuries, property damage, trademark infringement, and libel.

Example 1: Your mobile oil change business orders supplies from a vendor but then is unable to pay the vendor on time. He sues. Rest assured that his claims will only be satisfied by recourse to business assets. Your personal assets are shielded from such action.

Example 2: Your mobile oil change business becomes indebted to the local bank. The bank takes you to court after you default on the loan. Provided you have not given a personal guarantee, the bank will be unable to move against your personal assets.

Example 3: You consider winding up your mobile oil change business; new city regulations make it difficult to operate. Regrettably, the business lacks enough assets to pay off all creditors. Happily, your personal assets would be protected by the limited liability shield of your LLC.

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 Mobile Oil Change 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 mobile oil change 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

Mobile oil change business 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.

A mobile oil change business should carry general liability insurance which will protect against risks that result in personal injury or property damage. It will also cover legal fees and court judgments.

Common Situations Business Insurance May Cover for a Mobile Oil Change Business

Example 1: As a customer walks around his vehicle while you change the oil, he trips over your toolbox, breaks an arm in the resulting fall, and demands your business pay for his medical treatment. General liability insurance would cover his medical bills.

Example 2: During an oil change, you accidentally spill oil over a customer’s open laptop bag — ruining her expensive laptop. She asks you to buy her a replacement. General liability insurance would cover the cost of replacing the customer’s damaged property.

Example 3: A competitor sues you for libel. While you disagree with the accusation, you want to hire an attorney as soon as possible. General liability insurance would pay for your legal fees and any required settlement.

Other Types of Coverage Mobile Oil Change 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 mobile oil change businesses should obtain.

Commercial Auto Insurance

Since you will be driving your truck on public roadways, you are mandated by the state to carry a commercial auto policy. Auto insurance protects not only your vehicle but any liability you may have in an accident. Your personal car insurance will not cover you if you are driving the business truck, even if you are off duty.

Commercial Property Insurance

If you own your location instead of renting, you need commercial property insurance to protect the building. Property insurance also covers items owned by your business.

Mobile oil change businesses invest heavily in the tools that are used to complete their work. Be sure that you have enough coverage to replace all of your tools in the case of a loss. This coverage is generally offered in a Business Owner Policy (BOP).

In addition to the policies outlined above, there are a few other types of coverage your mobile oil change 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.

Workers' Compensation Insurance

If your mobile oil change business has any employees (full-time or part-time), you are legally required to carry workers’ compensation insurance. This type of coverage will help compensate your employees in the case that they get injured on the job.

Read more about workers’ compensation insurance.

Business Interruption Insurance

In the event of a fire, flood, or other catastrophes, there is a good chance your business operations will be halted for some time. Business interruption coverage is designed to help you recoup a portion of the revenue your business would lose due to the inability to operate.

This type of insurance is typically included in a business owner’s policy.

Commercial Umbrella Insurance

Umbrella coverage allows you to extend above and beyond the standard limits of your other business insurance policies. If you are faced with a large lawsuit or other claim situation, there’s a possibility that the coverage limits of your standard policies will be insufficient. In this case, your umbrella policy will allow you to surpass these limits.

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 auto insurance.

Read our Mobile Oil Change Business Insurance article for more info.

Startup costs for a mobile oil change business range from $2,000 to $10,000. Your main item will be a truck. Ongoing costs will include vehicle expenses, fuel, oil, wages perhaps, and liability insurance.

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

The ongoing expenses for a mobile oil change business are relatively low and include fuel, vehicle maintenance, oil, and parts.

Learn more about running a mobile oil change business.

A mobile oil change business makes money by charging customers for oil changes and other routine maintenance on their vehicles.

Learn more about starting a mobile oil change business.

A mobile oil change business provides a mobile solution for people who need routine maintenance for their car, including oil changes and other services. These businesses usually operate out of a trailer with all the necessary equipment.

The oil change market continues to grow, meaning a business in this industry can make a nice profit with only a small percentage of the market.

Learn more about starting a mobile oil change business.