Do I Need an LLC for My Tree Stump Removal Business?

Starting a limited liability company (LLC) for your tree stump removal 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 tree stump removal business, lawsuits can arise from things like damaging the other trees on a client’s property while removing a stump, adopting a copyrighted logo as your own, and collisions between other road users and the business’s vehicle.

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

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

A person using a chainsaw on a tree stump

Should I Start an LLC for My Tree Stump Removal 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 Tree Stump Removal Business

By starting an LLC for your tree stump removal 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.

Tree stump removal businesses will benefit from liability protection because of the relatively high risk of personal injuries, property damage, and libel.

Example 1: After pulling up a stump, a client’s other trees begin to die. They believe you damaged their roots and demand you pay for the damage to their lawn. Your personal assets could not be used to pay for this since they are protected with limited liability as an LLC.

Example 2: The logo you are using is strikingly similar to a competitor who is suing you over copyright infringement. Should you be found in the wrong, your personal assets could not be seized in the settlement as they are protected with limited liability from being an LLC.

Example 3: The truck you use for work is in an auto accident on the way to a job. The other motorist demands you pay for the damage to their vehicle. Expenses could not be paid with your personal assets as limited liability as an LLC protects them.

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 Tree Stump Removal 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 tree stump removal 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

Tree stump removal 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.

Removing stumps can require expensive tools, which if out of commission means you could not work. Having insurance can help replace or repair these tools if they break, helping you get back to work sooner. Insurance also covers liabilities that may lead to lawsuits, settlements, and legal fees.

Common Situations Business Insurance May Cover for a Tree Stump Removal Business

Example 1: During a job, a large stump falls on your client’s driveway, cracking it. They are asking for $19,000, claiming the entire driveway must be redone. Your general liability insurance would cover the cost to repair or replace the driveway.

Example 2: While visiting your facility, a customer falls and injures her back. She is suing your company for the cost of her medical expenses and additional damages. General liability insurance would pay for legal representation and awarded damages.

Example 3: Your new ad campaign features a photo that is covered under copyright laws. You have been named in a copyright infringement case and are being sued for $110,000. General liability insurance would assist with attorney’s fees and court-awarded damages.

Other Types of Coverage Tree Stump Removal 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 tree stump removal businesses should obtain.

Commercial Auto Insurance

If you or a team member is involved in an auto accident conducting business-related activities, commercial auto insurance can pay for the repairs to damaged vehicles, as well as medical expenses, liability claims, and lost equipment.

Commercial Property Insurance

A commercial property insurance policy is purchased to protect a business’ investments. Should a loss, such as a windstorm, theft, or fire occur, the policy would pay to repair or replace owned real estate, as well as any business-owned assets kept onsite.

Inland Marine Insurance

Most commercial property insurance policies exclude or limit coverage to business tools used offsite. To avoid any coverage gaps, it may be necessary to purchase an inland marine policy. Inland marine insurance covers business property, equipment, and tools that are damaged while off premises.

Workers' Compensation Insurance

This state-mandated policy is a requirement for all business owners with employees. It offers medical coverage and a percentage of lost wages for workers who are injured while on the job. If sued over the claim, the policy would also cover your legal representation costs.

Read more about workers’ compensation insurance.

Crime Insurance

Employee dishonesty, fraud, and forgery are excluded coverages on a standard policy. Crime insurance covers you for such a loss, reducing the chances of a gap in coverage.

Commercial Umbrella Insurance

If a lawsuit is brought against your company that becomes expensive and lengthy, your underlying general liability limits could be exhausted. An umbrella policy takes over where the general liability insurance leaves off, keeping your personal and professional assets protected in a worst case scenario.

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, commercial auto insurance, and worker’s compensation insurance.

Read our Tree Stump Removal Business Insurance article for more info.

Startup costs for a tree stump removal service run between $10,000 and $50,000, and it’s easy to stay on the lower end of this range when starting out.

Buying used you can pay around $6,00 for a truck and $6,200 for a grinder and trailer.

$1,100 can also buy a chainsaw and leafblower for cleanup.

Business owners should also have some basic safety equipment, such as a hard hat, safety goggles, and earplugs. This equipment isn’t expensive, though.

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

Vehicle maintenance, grinder maintenance, and fuel are the primary ongoing expenses.

Learn more about running a tree stump removal business.

A tree stump removal business charges customers to remove and grind up tree stumps.

Learn more about starting a tree stump removal business.

As the name suggests, a tree stump removal business assists clients with removing and disposing of tree stumps. Profits depend primarily on customer volume.

Learn more about starting a tree stump removal business.