Should I Start an LLC for My Truck Driving School?
Starting a limited liability company (LLC) for your truck driving school 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 truck driving school, lawsuits can arise from things like poor instruction resulting in a student’s unemployment, damage to property while on practice drives, and personal injury.
LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your truck driving school seem more credible.
Recommended: Use Northwest to form an LLC for $29 (plus state fees).
Do I Need an LLC for a Truck Driving School?
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 Truck Driving School
By starting an LLC for your truck driving school, 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.
Truck driving schools will benefit from liability protection because of the risk of being sued for personal injuries and property damage.
Example 1: A student sues you, claiming that you did not instruct them properly resulting in them being unemployed for the last year. Should you be found in the wrong, your personal assets could not be taken in the settlement since they are protected with limited liability as an LLC.
Example 2: While on a practice drive, a student collides with a small business. The owners demand you pay for the damage. Your personal assets could not be used to pay for this as they are protected with limited liability from being an LLC.
Example 3: A student trips over some furniture in your school and breaks their arm. They ask for you to pay for the medical expenses. As your business is an LLC, limited liability protects them so they could not be taken to pay for the expenses.
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 Truck Driving School
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 truck driving school 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
Truck driving schools 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).
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
- Alabama LLC
- Alaska LLC
- Arizona LLC
- Arkansas LLC
- California LLC
- Colorado LLC
- Connecticut LLC
- Delaware LLC
- Florida LLC
- Georgia LLC
- Hawaii LLC
- Idaho LLC
- Illinois LLC
- Indiana LLC
- Iowa LLC
- Kansas LLC
- Kentucky LLC
- Louisiana LLC
- Maine LLC
- Maryland LLC
- Massachusetts LLC
- Michigan LLC
- Minnesota LLC
- Mississippi LLC
- Missouri LLC
- Montana LLC
- Nebraska LLC
- Nevada LLC
- New Hampshire LLC
- New Jersey LLC
- New Mexico LLC
- New York LLC
- North Carolina LLC
- North Dakota LLC
- Ohio LLC
- Oklahoma LLC
- Oregon LLC
- Pennsylvania LLC
- Rhode Island LLC
- South Carolina LLC
- South Dakota LLC
- Tennessee LLC
- Texas LLC
- Utah LLC
- Vermont LLC
- Virginia LLC
- Washington LLC
- Washington D.C. LLC
- West Virginia LLC
- Wisconsin LLC
- Wyoming LLC
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.
Since you will be instructing students on how to operate heavy machinery, accidents are bound to happen. Should one of your trucks be damaged by a student, insurance can help pay for the cost to repair or replace it.
Common Situations Business Insurance May Cover for a Truck Driving School
Example 1: When walking into one of your classrooms, a student slips on spilled water that was never properly cleaned. General liability insurance would cover the costs of their medical injuries.
Example 2: A student decides to sue your company because they feel your classes didn’t adequately prepare them to find a job. General liability insurance would pay for the costs to fight the suit and defend your reputation.
Example 3: A trade school in another part of the state has a similar logo to yours. They feel they’re losing time and productivity because of your company and claim trademark infringement. General liability insurance would cover the costs to either keep your logo or settle the claim without going to court.
Other Types of Coverage Truck Driving Schools 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 truck driving schools should obtain.
Commercial Auto Insurance
All truck schools will need commercial auto insurance to protect the vehicles, property, and people who may be affected by an accident. Schools will need to discuss their specific circumstances with their insurance company to ensure the policy covers a wide variety of incidents.
Commercial Property Insurance
If you own the grounds used for your classes, you’ll need commercial property insurance to cover damages against bad weather, criminal activity, and fire. Commercial policies vary by location and business, but a truck driving school can typically use it to pay for its equipment and supplies in addition to covering the repairs of the physical structure itself.
Workers' Compensation Insurance
All businesses with employees are required to carry workers’ compensation insurance in case of accident or injury on the job. This policy covers sudden incidents (whether in a vehicle or not), and also chronic conditions that may develop after years of repetitive motions.
Professional Liability Insurance
Because teachers provide both general instruction and specific guidance to students, professional liability insurance is available in case an instructor omits information or accidentally provides false information to a student. For example, if a former student can prove they lost their job due to an incorrect technique they learned in class, they could potentially sue the school for loss of income. Professional liability insurance would cover the costs of the suit.
Commercial Umbrella Insurance
Umbrella insurance is designed to cover your business in the case of large or drawn-out lawsuits that exceed the limits of your general liability policy. For example, if a libel lawsuit costs you a total of $250,000 to fight and your general policy only covers $150,000, umbrella insurance can be applied to cover the leftover funds.
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, professional liability insurance, workers’ compensation insurance, and commercial property insurance.
Read our Truck Driving School Business Insurance article for more info.
Some trucking school business owners report start-up capital requirements as low as $15,000, while others report spending upwards of $125,000. The following should be included in your initial budget:
- Location
- Catalog
- Educational Materials
- Business software
- Trucks
- Teacher
- Advertising
Visit our How to Start a Truck Driving School guide to learn more about the costs of starting and maintaining this business.
Some typical truck driving school expenses include:
- PTDI certification
- Payroll
- Rent and utilities
- Vehicle maintenance
- Educational materials and supplies
- Marketing/advertising
- Insurance
Learn more about running a truck driving school.
Truck driving schools make money by selling driving courses to students.
Learn more about starting a truck driving school.
Truck driving schools teach individuals how to drive commercial trucks safely. The amount of profit a truck driving school can make depends on the number of students it has, how much it charges per student, as well as its overhead.
Learn more about starting a truck driving school.
