Should I Start an LLC for My Tech Support Business?

Starting a limited liability company (LLC) for your tech support 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 tech support business, lawsuits can arise from things like failure to meet contractual obligations (e.g., to fix a client’s computer by an agreed-upon date) or selling faulty or copyrighted software without permission.

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

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

Do I Need an LLC for a Tech Support Business?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form 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 Tech Support Business

By starting an LLC for your tech support 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.

Tech support businesses will benefit from liability protection because of the risk of being sued for things like workplace accidents, slander, trademark infringement, and more.

Example 1: Your tech support business agreed with a client that it would be able to solve the computer problems they were experiencing by a certain date but was unable to fulfill this promise. As a consequence, the client suffered considerable financial loss and decided to file a lawsuit against your business for breach of contract. In the ensuing lawsuit, your personal assets are prevented from being used to satisfy any business obligation to pay damages.

Example 2: One of the employees at your tech support business installs a defective program on a client’s laptop that completely ruins the device. This prompts the customer to sue your business for its negligence. In the ensuing litigation, you are precluded from being held personally liable to satisfy any damages the court awards to the plaintiff.

Example 3: It is discovered that one of the employees at your tech support business is distributing trademarked software without a license to do so. When the owner of this copyright realized this, they sued your business for this infringement. Limited liability prevents your personal assets from being pursued by the court to satisfy the plaintiff’s settlement.

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 Tech Support 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 tech support 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

Tech support 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.

Owners of tech support businesses will need to make sure they own insurance. Not only does operating your business without insurance leave your assets completely open and vulnerable to all the liabilities they face (e.g., customer property damage, etc.), but it also makes your company appear more credible.

Common Situations Business Insurance May Cover for a Tech Support Business

Example 1: While visiting the office, a client trips over a cord and injures herself. General liability insurance would cover her medical bills.

Example 2: An employee tweets about how difficult one of your clients is to work with. The client sees the post, knows it is about him, and sues your business for defamation. Your general liability policy would cover the cost of legal representation, as well as any court-awarded damages.

Example 3: During a presentation to a potential new customer, you accidentally spill your coffee, destroying his expensive laptop. He is suing your business to replace the laptop. General liability insurance would cover the cost to replace the client’s ruined equipment.

Other Types of Coverage Tech Support 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 tech support businesses should obtain.

Professional Liability Insurance

Without the addition of professional liability insurance, lawsuits stemming from your work, such as project delays, coding errors, and computer glitches, will not be covered. Also known as errors and omissions (E & O) insurance, this policy covers the cost of legal representation and court-awarded damages if your professional actions result in a loss for one of your customers.

Commercial Property Insurance

Commercial property insurance covers the cost to repair or replace business-owned assets, including owned physical property and/or contents stored onsite. If your commercial property is damaged in a covered event such as a natural disaster, fire, or theft, this policy will help you repair or replace your property so you can get back to work.

Workers’ Compensation Insurance

Businesses with full-time and part-time employees are required by state law to carry workers' compensation insurance. Its purpose is to provide medical coverage for on-the-job illness and injury. In the event of a more serious incident, the company will be provided legal representation and cover court-awarded damages up to the limits of the policy.

Data Breach Insurance

Working in tech support means you rely heavily on technology for most aspects of the business. Unfortunately, this also makes you vulnerable to online hackers, a loss that is specifically excluded on a general liability policy. Data breach insurance fills that coverage gap, paying damages from a data breach that results in stolen user data.

Commercial Umbrella Liability Insurance

Like many professions, your work exposes you to many liability risks. For larger insurance claims, your underlying general liability policy limits may be exhausted before the claim is settled. A commercial umbrella policy acts as an additional layer of protection, picking up where your general liability policy leaves off.

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.

If you are thinking about launching a tech support business, it is recommended to budget between $12,000–$18,000 for this (and an additional investment if you decide to franchise). This figure should be sufficient to cover everything your tech support business will need, including a computer, phone, high-speed internet, reliable transportation, a website, marketing, and insurance.

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

Payroll and continuing education are the primary ongoing expenses.

Learn more about running a tech support business.

Tech support businesses charge clients for their services by the hour.

Learn more about starting a tech support business.

A tech support business offers help to customers as needed. Services vary and can include installation and maintenance of equipment and software, system auditing, troubleshooting, and others.

Net profits depend on customer volume and overhead costs.

Learn more about starting a tech support business.