Do I Need an LLC for My Scooter Rental Business?

Starting a limited liability company (LLC) for your scooter rental 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 scooter rental business, lawsuits can arise from things like pedestrians suffering injuries due to the poor maintenance of your scooters or not obtaining the required permits to operate your business.

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

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

Should I Start an LLC for a Scooter Rental 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 Scooter Rental Business

By starting an LLC for your scooter rental 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.

Scooter rental businesses will benefit from liability protection because of the risk of customer injuries while they are riding the scooters. There are also other general business risks like property damage, trademark infringement, and more.

Example 1: A customer trips over a carelessly placed object at a scooter rental business and sustains an injury as a result. If the customer decides to sue the business for damages, limited liability protection will ensure that the owner’s personal assets are safeguarded from any fees associated with the lawsuit.

Example 2: While riding a rented scooter, a customer gets into an accident due to an overheating motor and sustains severe injuries as a result. Following this, the customer sues the business for damages. If found liable, limited liability protection will ensure that only the business’s assets will be used to cover any compensation associated with the lawsuit.

Example 3: An employee loses a finger due to a gear malfunction during the maintenance of one of the company’s scooters. In the event of a lawsuit, limited liability protection offered by the LLC structure will ensure that the owner’s personal assets are protected from any compensation related to the lawsuit.

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 Scooter Rental 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 scooter rental 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

Scooter rental 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.

Scooters, though fun, can lead to multiple risks when used by the public. Hence, scooter rental businesses need insurance to protect their assets against theft, damage, and lawsuits from clients.

Common Situations Business Insurance May Cover for a Scooter Rental Business

Example 1: An inexperienced rider reverses rather than accelerates forward, crashing before leaving the parking lot. The customer is injured and causes physical damage to a neighboring business’ delivery van. General liability insurance would cover the customer’s medical bills and costs to fix the damage to the delivery van.

Example 2: While visiting your business, a customer trips and inadvertently knocks down a row of scooters. One of the scooters falls onto another customer’s leg. The injured customer must later have surgery due to complications stemming from the accident and is seeking payment for damages. A general liability policy will cover legal representation and any resulting payout.

Example 3: Your marketing representative uses a tagline from a local author’s book. The author names both you and the marketing representative in a lawsuit. General liability insurance would cover the cost of legal representation and the damages ruled by the court, up to the limits of your policy.

Other Types of Coverage Scooter Rental 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 scooter rental companies should obtain:

Commercial Property Insurance

If you own the building in which you run your scooter rental business, commercial property insurance is an essential part of your insurance package. This would cover the building as well as any business-related property you keep on-site.

When considering your coverage amount, be sure to include the cost of any renovations you’ve made to the building and the replacement cost of all business property and specialized equipment stored there. Because your customers drive your rental scooters on public roadways,

Workers’ Compensation Insurance

Your team is an essential part of your business’s success, so it’s important to cover them should an injury occur on-premises. Workers’ compensation is (typically) state-mandated insurance that covers employees in the event of a work-related illness or injury. This covers medical bills for an employee’s work-related injuries, offers payment for lost wages, and also provides legal representation should a lawsuit occur.

Business Interruption Insurance

Could you keep your business afloat if you were forced to shut down for an extended amount of time? If not, you should consider purchasing business interruption insurance. In addition to replacing a portion of lost revenue, this insurance will help pay the expenses to move to a temporary location and any additional costs incurred because of that move.

Commercial Umbrella Liability Insurance

While rewarding, the transportation industry faces increased liability risks, with claims often exceeding the limits of primary liability policies. Commercial umbrella liability insurance increases liability coverage, protecting your business against sizable covered lawsuits.

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 property insurance.

Read our Business Insurance for Scooter Rental Companies article for more info.

The initial investment for a scooter rental business includes the cost of purchasing scooters ($500 each on average), renting a store, and obtaining insurance for the business and customer rentals ($10,000–$12,000 on average). You will also need to budget for regular maintenance, repair costs, marketing, and advertising expenses.

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

The largest ongoing expense will be the maintenance and replacement of rental scooters. Other expenses may include payroll, insurance, marketing, rent, and utilities.

Learn more about running a scooter rental business.

Scooter rental businesses rent out scooter equipment to customers at decided rates based on hourly use, daily use, or scooter mileage.

Learn more about starting a scooter rental business.

Scooter rental businesses rent scooters to customers as an easy, inexpensive transportation solution.

Whether providing long-term rentals, or rental by the mile, scooter rentals have the potential to profit from a variety of tourist and heavy traffic locations and cities.

Learn more about starting a scooter rental business.