Should I Start an LLC for My Snow Plow Business?

By starting an LLC for your snow plow 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.

Snow plow businesses will benefit from liability protection because of the risk of property damage and personal injury. 

Example 1: You lease a truck for your snow plow business, and it eventually gets damaged. The lease period expires, and the truck owner asks that you kindly fix or replace his truck. If he insists and proceeds to sue, your business may be required to pay damages but your personal assets would be shielded by the LLC.

Example 2: While plowing a street, your heavy-duty snow removal equipment hits a fence and brings a part of it down. The building owner demands that you fix his fence. If he decides to sue, your business may be liable to pay damages. But as the business owner, you will personally not be responsible for any compensation if you have an LLC in place.

Example 3: You take a loan to buy modern equipment for your snow plow business. However, you could not secure enough contracts in the season. Resultantly, you are unable to repay your loan when it’s due. If the lender runs out of patience and sues, your business may be affected, but their lawsuit will not affect your personal assets if you have an 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 Snow Plow 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 snow plow 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

Snow plow 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.