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LLC For Landscaping Businesses
Successful lawn care and landscaping can yield significant profits. With operating profit margins ranging from 15% to 45%, you have the potential to take home great earnings after deducting all operating costs. In fact, a relatively small- to medium-sized service business can generate an annual revenue of up to $200,000.
Do you want to establish a landscaping business but don’t know where to start? One of the most important steps is choosing a business structure to form it as. Our recommended one for new business and solo owners is an LLC. But what is that? This article will explain why it is important to form a landscaping LLC, its benefits, and how to create your own.
Definition
What Is An LLC?
LLC stands for limited liability company, a corporate structure that offers owners personal protection from liabilities incurred by their business. LLCs also provide easy access to capital and tax benefits, which make them an attractive choice for small businesses.
Furthermore, forming an LLC is relatively straightforward, with fewer formalities and less administrative burden compared to other corporate structures. This simplicity makes LLCs an attractive choice for small businesses who want to establish a legally recognized entity without excessive complexity.
Advantages
What Are The Advantages Of A Landscaping LLC?
LLCs offer a ton of advantages for landscaping businesses. Below are some of the notable ones:
Liability protection
LLCs provide liability protection for owners. If a client decides to sue you for whatever reason or your business gets into legal/financial debt, it is only your business that will get in trouble and not your name or assets. The protection provided by an LLC also extends to its members who may have ownership shares in the business but are not actively involved in its day-to-day operations.
Tax benefits
LLCs offer the potential for pass-through taxation that most other business entities do not. This means that you are only taxed once—on your personal income. Your landscaping business does not need to pay a separate tax to the state.
Flexible management
Forming an LLC offers the advantage of granting members the ability to actively determine the management of their company, allowing for greater control and flexibility. Unlike other business structures like corporations, where management is structured hierarchically with a board of directors and officers, an LLC provides more autonomy to its members.
Additionally, unlike corporations or partnerships, where profit distribution is based on predetermined ownership percentages, LLCs have the freedom to distribute profits according to the agreement reached among their members or owners.
Easy to set up
As mentioned, one of the advantages of setting up a landscaping LLC is its simplicity and the reduced formalities. When compared to corporations, for example, the process of forming an LLC involves fewer bureaucratic requirements and administrative tasks. There are also fewer fees and people involved.
Disadvantages
What Are The Disadvantages Of A Landscaping LLC?
While there are not a lot of disadvantages for you to consider, below are two that you definitely need to take note of:
- Higher Cost: Setting up an LLC requires more paperwork and may be more expensive than other business entities. Be prepared to budget.
- Transferable Ownership: The transferability of LLC ownership is more limited than other business structures. There are a lot of additional fees and paperwork involved.
LLC Formation
How To Create A Landscaping LLC
Forming a landscaping LLC only involves a couple of steps, and most of them you can accomplish on your own. However, remember that you should be willing to hire a professional if you are not confident about accomplishing a task by yourself, such as drafting important documents.
- Choose a unique name
- Hire a Registered Agent
- File an Article of Organization
- Create an Operating Agreement
- Get an EIN
Choose a unique name
Choosing a unique name is the first step in launching any LLC. Stay away from language that may be offensive or too generic, and avoid any words prohibited by governing regulations (such as “banks”). Moreover, take into account already established trademarks of other businesses. No two businesses can be named the same in one state—even if the other entity is not in landscaping.
Finally, some states mandate that you include “LLC” or “Limited Liability Company” in the name, so check with your local authorities if you need to do the same.
Hire a Registered Agent
Registered agents take care of all the paperwork associated with setting and maintaining your LLC, including filing documents with the state government and collecting official notices such as service of process forms or tax documents. This can be you or a professional who can manage local businesses in your area. The only requirement is that they must be located in the same state where you plan to form your LLC.
File your Article(s) of Organization
The Article of Organization is a document that is filed with the Secretary of State’s office and is what officially forms your LLC under applicable laws and regulations. It requires specific information about the type of business entity being formed, such as its name, physical address, members/owners, registered agent contact information, and others. Triple check to make sure that everything is accurate on your first submission. LLC revisions and refiling cost a lot of money.
Create an Operating Agreement
While it is not required in many states, we recommend your draft an Operating Agreement anyway. This document outlines how your company will be managed and operated, including decisions such as voting rights among members/owners. It can also include other rules that govern operations within the company structure, like how profits are distributed among members/owners or what happens if someone decides they no longer wish to be involved in your business.
Get an EIN
An Employer Identification Number (EIN) is what you will be using to pay taxes to the IRS if you choose to hire employees. It is also required if you are opening bank accounts or applying for loans/credit cards on behalf of your landscaping LLC. Applying for one is free and easy—simply go to the IRS website and fill up a form.
LLC Taxes
How Are Landscaping LLCs Taxed?
Tax is one of the most important things to consider when forming any business. Here, we will discuss four of the most applicable taxes for landscaping LLCs and how they can affect your operations.
Franchise tax
A franchise tax is a fee levied by state governments on businesses that have been granted special privileges or charters from the state. This tax usually applies to companies with limited liability protection (such as corporations and LLCs), so your landscaping business will likely be subject to this taxation. We say “likely” because not every state requires its businesses to pay a franchise tax.
Sales tax
Sales tax is imposed on services (or goods) sold by your landscaping LLC. Sales tax is not covered by you but by your customers. However, it is important to know how much you should be taxing them, so you can remain compliant with your local tax laws.
Self-employment tax
Self-employment tax is what most LLCs file for annually unless they choose to tax their business as a corporation (which we do not recommend for solo-run businesses). For LLC, this is the tax incurred by your personal income or your business’ total profit. If you have more than one member, income and taxes are split.
Costs
What Are The Costs Of Starting A Landscaping LLC?
There are individual costs associated with forming an LLC and special state taxes based on your gross income. It must be completed at the end of the year. Here is a breakdown of the important costs:
LLC Costs
State filing fee
$50+
Registered agent service
$100+
LLC formation service
$50+
Operating agreement
$200+
Business license and permits
$50+
Employer Identification Number (EIN)
Varies
Initial legal and accounting fees
$200+
Equipment and supplies
$1,500+
Marketing and advertising
$500+
LLC costs may include things like filing fees for document submission and registration agent fees to help file documents correctly. It will also include compliance fees for setting up other paperwork like state registrations and annual fees for ongoing compliance maintenance. It is necessary to understand the associated costs to reap the full benefits of this business structure.
Creating an LLC for your landscaping business is a smart choice. It offers valuable protection for both you and your assets, ensuring that your personal belongings are safeguarded. Moreover, forming an LLC helps maintain the reputation and trustworthiness of your services, which can have a positive impact on your business.
If you are not sure where to start, our team at StartGlobal is here to assist you. We provide comprehensive services designed to guide and support you throughout the process of starting your landscaping LLC.
For a more detailed overview of forming LLCs in various states, check one of our guides below:
Comparisons
Is LLC The Best Entity For Me?
Maybe, LLC isn’t the right entity for you. Maybe it is a C-Corp. Only way to find out is to directly compare them all.
LLC vs Corporation (C-Corp)
Sole proprietorships and Limited Liability Companies (LLCs) are two of the most common business entities for individuals and small businesses. Learn what differentiates the two today.
LLC vs S-Corp
Not sure what business structure to choose? Learn about the key differences between LLC and S-Corp today.