Do I Need an LLC For a Lawn Care Business?

Do I Need an LLC For a Lawn Care Business?

Are you considering opening your own lawn care business? If so, you must think about lawn care business organization.

A few questions to ask are:

  • Do I need a lawn care LLC?
  • Can I operate as a sole proprietorship?
  • What are the pros of an LLC?

Do I Need an LLC To Mow Lawns?

No, but they are very beneficial. If you’re mowing your neighbor’s lawn or a friend’s lawn, you likely don’t need an LLC. However, an LLC would help offer you protection for events that may only happen in 1 out of 10,000 mows.

For example, if a customer claims that you caused property or bodily injury, they can sue you.

If you’re a sole proprietor, there’s no division between you and your business. A lawsuit without an LLC can lead to you being liable for incidents out of your control and can involve your:

  • Car
  • Home
  • Savings

A lawn care LLC offers limited liability protection, keeping your personal assets from being involved in a lawsuit.

Lawn Care LLC or Sole Proprietorship?

Most lawn care businesses will benefit from incorporating as an LLC. Simple and inexpensive, you can form an LLC for cheap, and they’ll offer numerous key benefits, such as:

  • Limited liability, meaning that your home, car and savings accounts are protected in the event that a settlement against the business occurs.
  • LLCs have more tax options and benefits than sole proprietorships.
  • Businesses that are an LLC are seen as more credible by potential customers.

Limited liability is a protection that cannot go understated in your decision to incorporate. If your business is involved in a lawsuit or defaults on debt, creditors cannot come after your personal assets.

Even if you have general liability insurance, there’s always the chance that:

  • Insurance won’t cover the full cost of the claim
  • A judge will request your assets be liquidated to pay the debt

With an LLC that is operated properly without co-mingling any assets, you’re shielded from liability. Instead, the creditor or judge can ask the business to pay the debt, but the owners of the lawn care business are personally shielded from liability.

Why?

The corporate veil. A corporate veil protects owners from being held liable for business debts. However, there are certain rules that you must also follow to ensure that you don’t pierce the veil, such as not co-mingling bank accounts.

Sole Proprietorship

Anyone can be a sole proprietor if they are a legal citizen. While you can start operating your lawn care business a day or two earlier, you will be solely liable for the business. What does this mean?

You’re:

  • 100% liable in the event you’re sued
  • 100% responsible for any judgments against you
  • At risk of having to liquidate assets to satisfy judgments

Additionally, if you do not incorporate, you’re also at a business disadvantage because your business will not be seen as “professional,” and it can be very difficult to raise capital. If you do grow the company into a successful entity, you’ll find it more challenging to sell the business.

In terms of taxation, an LLC is treated as a pass-through entity, meaning it will be taxed as a partnership or sole proprietorship. For example, if you’re the only employee, the net income of the business will pass to you and be filed on your own individual tax return.

You’ll be taxed based on the owner’s tax bracket in this case.

However, with an LLC lawn care business organization, you can always treat your business as an S Corp. The benefits here are the option of being able to reduce your tax burden and may even be able to minimize self-employment taxes.

There are many benefits to incorporating as an LLC, and the tax savings alone can help offset the initial incorporation costs.

Forming a Lawn Care LLC is Easy

Starting a lawn care business is a decision to have financial freedom. You have a lot of great opportunities in an ever-in-demand business. However, the initial steps that you take to open your business can have lasting consequences for your business.

Opening your lawn care business as a sole proprietorship may seem like the easy, logical choice, but an LLC will provide:

  • Liability protection
  • Tax choices
  • Peace of mind

While you may not need to have an LLC to start your business, it’s the right legal decision in the long term. You may never be involved in a lawsuit or go bankrupt, but if you are, the small cost of an LLC will protect your savings and home from being taken to satisfy your debts.

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