Should I Start an LLC for My Party Bus Business?

Starting a limited liability company (LLC) for your party bus 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 party bus business, lawsuits can arise from things like employees causing accidents with other drivers while transporting customers to their destination.

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

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

Do I Need an LLC for a Party Bus 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 Party Bus Business

By starting an LLC for your party bus 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.

Party bus businesses will benefit from liability protection because transportation businesses, including party bus services, face property and liability risks at the state level and potentially the federal level if your fleet travels into multiple states. The larger the vehicle, the larger the expenses.

In addition to the risks of damages or injury, this industry faces heavy regulations that need to be understood at multiple levels and throughout any states where your fleet will operate.

Example 1: While transporting a number of people towards their destination, the driver of their party bus loses control of the vehicle and crashes. Due to the injury suffered by numerous people on board, the customer decided to sue your party bus business. If your business is found liable to pay the plaintiffs compensation, this requirement cannot be levied against your personal assets.

Example 2: During a journey to collect some passengers from their destination, one of the drivers for your party bus business collides with another car at speed as he was looking at his phone. Since the vehicle was completely destroyed in the accident, its owner brought a lawsuit against your business for this property damage. Your personal assets would be protected from any liability imposed on your business to pay compensation.

Example 3: In order to finance a fleet of vehicles for your party bus business, you decide to take out a loan. However, a local competitor proves to be far more popular than your business and steals all your clients. Consequently, your business will be unable to repay this loan, which prompts the creditor to sue it for defaulting on this debt. You are protected by limited liability from being held personally responsible for this.

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 Party Bus 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 party bus 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

Party bus businesses 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.

For party bus businesses, insurance is even more vital due to the sheer value of the assets they own (i.e., the buses themselves).

Common Situations Business Insurance May Cover for a Party Bus Business

Example 1: A bachelorette party guest walks to the front of the bus to toast the bride-to-be and trips on a string of festive lights. The resulting fall seriously injures her head. General liability insurance would cover the guest’s medical bills and any legal costs in the event of a lawsuit.

Example 2: En route to their performance venue, a group of entertainers stores their bags in the overhead bins. One overhead bin door falls off and seriously injures a passenger’s head, leading to an ambulance ride to the hospital. Your general liability coverage would cover the passenger’s medical bills as well as your legal costs and any damages if he decides to sue.

Example 3: During a tour of your warehouse and rental office, a potential investor slips on the wet floor in your restroom. After breaking a wrist and fracturing several ribs in the fall, she threatens to sue because you did not display a “wet floor” sign. General liability insurance would cover her medical bills as well as your legal fees and any settlement awarded in a lawsuit.

Other Types of Coverage Party Bus 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 party bus businesses should obtain.

Commercial Auto Insurance

While your business provides customer entertainment services, your daily operations focus on transportation. You must cover all vehicles used for business purposes with a commercial auto insurance policy, including any personal cars used for errands or other business-related activities.

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.

Business Interruption Insurance

If an accident or other disaster forces you to temporarily close while you make repairs, you could end up covering certain financial losses yourself. In most cases, you won’t be able to pay these costs out-of-pocket for an extended time period. Business interruption insurance would cover these costs until you can resume normal operations.

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, workers’ compensation insurance, and commercial property insurance.

Read our Business Insurance for Party Buses article for more info.

When planning around the startup cost for your party bus business, there are a number of initial costs to account for. This includes the salaries of the drivers, the buses, maintenance, gas, liability insurance, administrative supplies, and office space.

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

Fixed costs will be related to vehicle inventory and insurance, while some of the business’s variable costs will include the cost of operating the fleet, payroll, and miscellaneous repairs.

In addition to some of the fixed and variable costs listed above, fleet owners will also need to consider licenses, potential driver errors or incidents, and fuel.

Learn more about running a party bus business.

Party bus business owners should understand the cost of the fleet, insurance, payroll, office expenses, trip costs, and what rates you can charge in the area they do business. At that point, they can evaluate the potential margin per trip.

Learn more about starting a party bus business.

The motorcoach and charter industry has grown to over a $3 billion dollar industry. With average gross profit margins well into 20%, owners see the value of growing their fleets well into the double digits.

The average profit margin for a party bus business needs to be at least 10% to be sustainable.

Learn more about starting a party bus business.