Do I Need an LLC for My Security Guard Business?

Starting a limited liability company (LLC) for your security guard 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 security guard business, lawsuits can arise from things like allegations that your guards used too much force or provided inadequate protection against a break-in.

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

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

Security guard standing in front of a business

Should I Start an LLC for a Security Guard 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 Security Guard Business

By starting an LLC for your security guard 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.

Security guard businesses will benefit from liability protection because of the risk of workplace accidents and lawsuits from both employees and clients.

Example 1: There was a break-in in one of the properties your security guards protect. The owner is blaming you for complacency and has sued you for damages. If your business is structured as an LLC, your personal assets will not be liquidated during payment for damages.

Example 2: One of your security guards gives someone a severe head injury while managing a crowd. The victim has filed a lawsuit against your business for damages. If the court rules against you and levies a heavy fine on you, limited liability will confine the effect of the damage to only your business assets.

Example 3: Your security truck had an accident leading to the destruction of several properties. The owners have filed a lawsuit for damages. In situations like this, liability protection will shield your personal assets from the lawsuit if the court finds your business guilty.

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 Security Guard 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 security guard 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

Security guard 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.

Security guard businesses need insurance to protect themselves from the costs of bodily injury or property damage claims made against them.

Common Situations Business Insurance May Cover for a Security Guard Business

Example 1: As you’re doing a routine pat-down to a customer prior to a concert, you cause the customer to trip and seriously sprain their ankle. General liability insurance is available to cover the medical costs of the injury.

Example 2: While chasing down a suspect, you break several windows of neighboring properties and damage a public road sign. You can invoke general liability clauses to cover the property damage in the surrounding area.

Example 3: Another security company in the area sues you because your logo is similar to theirs. General liability will cover legal expenses whether you decide to settle or fight the charges.

Example 4: You accidentally arrest or detain someone who was reasonably innocent. General liability can help you defend yourself against any charges or settle the claims without harming your company’s professional reputation.

Other Types of Coverage Security Guard 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 security guard businesses should obtain:

Professional Liability Insurance

Professional liability is there to protect the company if clients feel they received inadequate services. If a security guard fails to act in a timely manner or they fail to inform clients of an impending threat, professional liability insurance covers negligence claims. This benefit is especially handy because the service is subjective in many ways. Your employee may have a legitimate reason for failing to act, but the client (and potentially a judge) may have a completely different take on the matter.

Commercial Auto Insurance

Security guard companies that give their employees a vehicle will need to have a commercial auto insurance policy. This is mandated by the state to ensure you have coverage regardless of what happens on the road. Commercial insurance covers your vehicle and employees as well as other vehicles and drivers on the road. It also covers any additional property damage that may occur. For example, if a security guard accidentally crashes into a lamppost, you'll have the funds to repair that public property.

Workers' Compensation Insurance

If your security guard company 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.

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 workers' compensation insurance if you have employees.

Read our Business Insurance for Security Guards article for more info.

Starting a security guard business does not cost much. The insurance costs the most, up to $3,000 for a six-month term. About $500 will be spent on legal and government costs. Other associated costs include necessary equipment and uniforms, which can vary depending on whether the guards have guns or other force tools.

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

Operating expenses for a security guard business include payroll, insurance, and office space rental.

Learn more about running a security guard business.

Security guard businesses often charge by the hour, with the rate depending on the number of guards. They can also charge a flat rate for an event or for a certain period of time.

Learn more about starting a security guard business.

Many businesses prefer to contract a professional security guard business rather than employ security guards directly. With low overhead and high-profit margins, a security guard business has a lot of potential.

A security guard business can start small with a few guards, and large office space is not required. Over time, the business can add more guards and even start providing specialty security services.

A typical security guard business can generate between $40,000 and $60,000 of revenue per guard.

Learn more about starting a security guard business.