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LLC For Lawn Care Businesses
Regular care is needed to keep lawns in top condition for years. And with so many of them that need tending to in the country, there is plenty of opportunity for lawn care businesses to thrive.
Are you looking to start a lawn care business? The first step is setting it up. There are many business structures you can use, and an LLC is one of them. But what is it, and how is it beneficial for your business?
Definition
What Is An LLC?
A Limited Liability Company (LLC) is a business structure that combines the advantages of many other business structures, like sole proprietorships and corporations. LLCs provide their owners with the same limited liability protection found in corporations yet feature greater flexibility in management and record-keeping. This makes it an appealing choice for many professionals looking for a more straightforward and cost-effective way to establish their businesses.
Advantages
What Are The Advantages Of A Lawn Care LLC?
With an LLC, you can enjoy many benefits, such as limited legal obligations. Let us take a look at some of them.
Pass through taxation
One key advantage of forming a lawn care LLC is pass through taxation. Instead of paying taxes on company profits as a corporation would, LLC taxes are “passed through” to their owners. This means that taxes are only paid once—on your personal income.
Limited liability
As previously mentioned, forming a lawn care LLC protects your name and your assets should something go wrong. Of course, you will still be responsible for any debts incurred by your company, but this protection limits how much you can be held liable for those debts.
Separate legal identity
Forming an LLC also provides a separate legal identity for your business. This protects your name, and not just your assets, if your LLC incurs any debts or faces other legal issues. Your name will not appear on count record nor will you be held personally liable if something such as injury or property damage happens during your operations.
Additionally, this separation allows you to open bank accounts and build credit in the name of your business. You will never have to use your assets as collateral for loans.
Disadvantages
What Are The Disadvantages Of A Lawn Care LLC?
There are not a lot of disadvantages to note for lawn care LLCs, but there are a couple of things you need to consider.
Transferability restrictions
Most LLCs are not easily transferable from one owner to another, as it can be complicated and costly. It also may require approval from other members if you are not its only registered owner. If you plan on selling your business in the future, remember to plan ahead.
Cost
While an LLC’s protections are invaluable and well worth the costs, forming one is more expensive compared to simpler structures like sole proprietorships and partnerships.
In addition to filing or annual maintenance fees to maintain your LLC status, you may also have additional requirements depending on your state. Researching applicable laws and regulations can help ensure compliance while keeping costs low.
LLC Formation
How To Create A Lawn Care LLC
Forming a Lawn Care LLC is a straightforward process. By following the steps outlined below and seeking guidance from a knowledgeable professional, you can successfully complete everything within a month.
- Choose a name
- Hire a registered agent
- File the Article(s) Of Organization
- Draft an Operating Agreement
- Obtain an EIN
Choose a name
Choose a name that reflects your lawn care services and stands out from your competitors. Once you have, make sure it is available—search the local Secretary of State’s database for duplicates. Reserve the name so no one else can use it while you complete your paperwork. They can hold it for you for up to 120 days.
Hire a registered agent
Once you have chosen and reserved a name for your lawn care LLC, the next step is to hire a registered agent for it. A registered agent is an intermediary between your business and local government agencies. They are the only ones legally authorized to accept (and submit) documents on behalf of your company if necessary. This person can be you or another member of the LLC, but if it is your first time forming a business, we recommend you hire a professional.
File the Article(s) Of Organization
The next and most important step is to file an Article of Organization with your Secretary of State. This document provides basic information about your lawn care LLC, including its name, address, and purpose. It also includes information about its members, managers, and directors, if applicable.
Some states will require additional paperwork, such as tax forms or licensing applications, so check with your local authorities for a complete list of requirements.
Draft an Operating Agreement
An operating agreement serves as a binding contract between LLC members. It outlines their roles and responsibilities within the company and their rights under state law. The document also details how decisions will be made within the LLC and how profits will be distributed among members or managers if applicable.
Operating agreements are not required in every state, but we say you draft one anyway to prevent conflict during your business’ operation.
Obtain an EIN
After completing all steps above, get an Employer Identification Number (EIN) from the IRS. This will allow you to open bank accounts in your business’ name and pay taxes. To apply for an EIN, fill out Form SS-4. You can find this on the IRS website.
LLC Taxes
How Are Lawn Care LLCs Taxed?
Taxes are an important part of any business but understanding the applicable one can be overwhelming for those new to the trade. For lawn care LLCs, these are the only ones you need to think about:
Federal taxes
As an LLC, you will usually pay or more of the following federal taxes:
- Self-employment tax
- Employment/payroll taxes
- Excise taxes (if applicable)
Tax requirements are different depending on your jurisdiction. If you are unsure of what you will be applicable for, do your research or get a professional accountant to help you.
Franchise tax
Franchise tax is a form of income tax imposed on LLCs in certain states. The franchise tax you will have to pay depends on the profits earned by your company and other factors such as its location and size. Again, only some states have this, so check with your Secretary if yours requires it.
Corporate tax
You can choose to form your LLC as a corporation and enjoy all the benefits of one, such as stock ownership. However, corporation LLC owners are subject to corporate tax on top of their personal income taxes. The amount owed in corporate taxes depends on several factors, including where the corporation operates and what type of corporation it is.
Costs
What Are The Costs Of Starting A Lawn Care LLC?
Forming a lawn care LLC comes with its fair share of costs. These expenses, much like taxes, differ from state to state.
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
$500+
Marketing and advertising
$500+
Forming an LLC for a lawn care business is a great way to protect yourself and your assets. You can even take advantage of the many tax benefits and flexibility it offers. Starting one up can be done relatively quickly, and the costs associated with formation are minimal compared to other business entities.
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.