Should I Start an LLC for My Solar Panel Store?

Starting a limited liability company (LLC) for your solar panel store 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 solar panel store, lawsuits can arise from things like employees suffering an injury while installing panels, the release of clients’ sensitive information as a result of a data breach, or property damage to a customer’s solar panels.

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

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

Do I Need an LLC for a Solar Panel Store?

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 Solar Panel Store

By starting an LLC for your solar panel store, 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.

Solar panel stores will benefit from liability protection because of the risk of product liability, property damage, financial data breaches, and workplace accidents.

Example 1: One of your employees is installing solar panels on a roof when they slip and fall, injuring themselves. They file a compensation lawsuit against your store, claiming negligence and lack of proper safety training. With limited liability protection in place, the lawsuit damages will be limited to only your business assets.

Example 2: A customer brings their solar panel to your store for repairs. While the equipment is in your possession, it is damaged by a fire or natural disaster, and the customer files a lawsuit for damages. With limited liability protection in place, you will not be personally liable for these losses, and your personal assets will be protected from any legal claims.

Example 3: As part of your daily operations, you are responsible for processing financial transactions and maintaining sensitive data such as credit card information or customer addresses. A data breach occurs, exposing this private information to unauthorized parties. With limited liability protection in place, you will not be personally liable for the resulting legal claims or financial losses.

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 Solar Panel Store

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 solar panel store 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

Solar panel stores 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 limited liability protection from being an LLC protects your personal assets, not your business assets.

Solar panel stores need insurance to protect their products and assets from potential financial losses due to theft, fire, property damage, or other scenarios that can affect their operations or assets.

Common Situations Business Insurance May Cover for a Solar Panel Store

Example 1: A customer slips on a showroom floor shortly after it’s mopped, falling and hitting their head hard. They require stitches and must be evaluated for a potential concussion. General liability insurance would probably cover the medical expenses.

Example 2: While delivering panels to your solar store’s warehouse, a vendor trips on the stairs and sustains multiple injuries. General liability insurance would likely cover the injuries.

Example 3: A marketer makes some questionable claims about your store’s solar panels, and customers notice they aren’t getting the performance that was promised. Several customers gather together and file a class-action lawsuit. General liability insurance would likely cover the suit’s legal costs and any settlement.

Other Types of Coverage Solar Panel Stores 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 solar panel stores should obtain:

Commercial Property Insurance

Any warehouses and/or showrooms that your solar panel store owns might need commercial property insurance. This coverage is widely used to insure commercial buildings as well as some of the equipment that’s regularly kept in them. Policies may also be available for outdoor yards that your business has.

Property insurance usually comes as part of a business owner’s policy (BOP).

Workers' Compensation Insurance

If your solar panel store employs workers, there’s a good chance you need workers’ compensation insurance. This insurance protects against job-related injuries and is required by many states.

When purchasing workers’ compensation insurance, make sure your employees are properly classified according to their respective roles. Anyone who works on panel installations should be categorized appropriately, as should any salespeople who don’t go to installation sites. Correct classifications ensure that all your employees are properly covered and that your business pays the right premium for a workers compensation policy.

Product Liability Insurance

Product liability insurance protects businesses from certain liability lawsuits that customers may file if a malfunctioning product causes property damage or injury. It may be purchased by wholesalers, distributors, retailers, or other companies that sell products at some level.

This is especially important coverage for solar panel stores because there are several ways that panels could cause damage or injury. For example, a panel could fall off a roof and strike someone if its mounting failed. Alternatively, an electrical issue could lead to a fire. Even if your store wasn’t ultimately responsible for such an incident, merely defending the business in court would be expensive if you didn’t have insurance to cover the legal fees.

Product liability insurance can often be added to a BOP.

Commercial Umbrella Insurance

Liability lawsuits can be expensive, and they sometimes exceed primary insurance policies’ limits. Commercial umbrella insurance gives you a way to purchase supplemental liability protection that adds to the limits of your qualified underlying policies.

Commercial umbrella insurance can often be added to a BOP.

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, workers’ compensation insurance, and commercial property insurance.

Read our Business Insurance article for more info.

Starting a solar panel store requires an initial investment of up to $500,000. This would go towards your initial expenses to market, hire a crew and perform the first rounds of installations. You can also join franchise opportunities within the industry but expect to pay access fees between $100,000 to $350,000.

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

Payroll, insurance, and inventory are some of the main operating expenses for a solar panel store.

Learn more about running a solar panel store.

Solar panel stores make money by selling customers solar panels and charging for installation.

Learn more about starting a solar panel store.

Solar panel stores sell and install solar panels for customers. They typically work with customers to create a customized plan for their location and then install the panels.

Solar panel companies can earn around $5,000 to $10,000 for an average residential installation.

Learn more about starting a solar panel store.