Should I Start an LLC for My Septic Tank Cleaning Service?

Starting a limited liability company (LLC) for your septic tank cleaning service 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 septic tank cleaning service, lawsuits can arise from things like your employees getting involved in accidents that damage a customer’s property, or a septic tank leaking after you clean it.

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

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

Do I Need an LLC for a Septic Tank Cleaning 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 Septic Tank Cleaning Business

By starting an LLC for your septic tank cleaning 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.

Septic tank cleaning businesses will benefit from liability protection because home improvement and operation companies such as septic tank cleaning services face the risk of becoming liable to a number of financial burdens, including those associated with the safety of clients and their property.

Example 1: One of your workers accidentally falls while working on a septic tank, sustaining severe injuries. He proceeds to sue you after receiving no compensation from you. Limited liability will protect your personal possessions if the court decides you should compensate him.

Example 2: A former client sues you after noticing her septic tank started to leak after you worked on it, which contaminated her backyard. As a result, she has sued you for damages. In the event of a guilty verdict, liability protection will limit the effect of the damages to only your commercial assets.

Example 3: While driving a business truck, one of your employees got into an accident and damaged people's private property. As a result, the property owners have sued your business for damages. In situations like this, being structured as an LLC will protect your personal finances and confine the effects of the incident to only your business assets.

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 Septic Tank Cleaning 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 septic tank cleaning 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

Septic tank cleaning 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.

Septic tank cleaning services need insurance to protect the business against risks and incidents like lawsuits, accidents, bodily injuries, permanent equipment damage, or theft.

Common Situations Business Insurance May Cover for a Septic Tank Cleaning Services

Example 1: When an employee leaves an open septic tank unattended during a cleaning, a child falls into the tank and becomes ill from ingesting waste. General liability insurance would cover the child’s medical bills and your legal costs in the event of a lawsuit.

Example 2: When a passerby doesn’t see a hose you laid across a sidewalk, they trip and sustain a concussion as well as a fractured wrist. General liability insurance would cover the person’s accident-related medical bills.

Example 3: An employee fails to notice a hose leak while cleaning a grease trap, and waste seeps out across a large commercial space. The property owner sues, seeking compensation for cleaning and repair costs. General liability insurance would cover your legal fees and any damages awarded in a settlement.

Other Types of Coverage Septic Tank Cleaning Services 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 septic tank cleaning businesses should obtain:

Commercial Auto Insurance

Any truck or van you use primarily for business requires commercial auto insurance to protect the vehicle, driver, and others on the road in the event of an accident. Be sure to select a policy that covers not only accident-related vehicle repair costs and medical treatment for anyone injured but also sufficient protection for any special equipment you carry to job sites in your vehicles.

Professional Liability Insurance

If a customer decides your advice regarding the maintenance or repair of their septic tank caused them harm and files a lawsuit, professional liability insurance would cover your legal fees as well as any damages awarded in a settlement.

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—such as if waste accidentally contacts an employee’s open wound. 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.

Home-Based Business Insurance

If you operate out of a home office, check with your homeowner's insurance provider to ensure your policy protects you against liability from business-related accidents. If not, consider adding home-based business coverage to your business owner’s policy (BOP) or your existing home insurance policy.

Commercial Property Insurance

If your company owns a commercial office space, you’re responsible for all business-related property housed there in the event of a fire, burglary, or natural disaster. Commercial property insurance would cover the cost of repairing or replacing your equipment, product inventory, and supplies after an accident so you 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.

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 Business Insurance article for more info.

The initial investment required to launch this service is high. You’ll need a pump truck and a location to dispose of trash. You can get a decent second hand truck for around $20,000 to $30,000. You may also need a commercial space to work and standard office supplies for your business.

Visit our How to Start a Septic Tank Cleaning Service guide to learn more about the costs of starting and maintaining this business.

Some ongoing expenses include office and equipment maintenance costs, truck maintenance, and fees associated with the removal and disposal of waste.

Learn more about running a septic tank cleaning business.

Money is made by charging customers for services related to the cleaning and maintenance of their septic tanks.

Learn more about starting a septic tank cleaning business.

Septic tank cleaning services offer cleaning and disposal services for both residential and commercial septic waste systems. While most septic tank cleaning services are usually involved in the process of pumping and disposing of the waste, they may offer additional services including cleansing of the tank.

Septic tank cleaning services can maintain a profit margin of up to 20%.

Learn more about starting a septic tank cleaning business.