Should I Start an LLC for My Balloon Distribution Business?

Starting a limited liability company (LLC) for your balloon distribution 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 balloon distribution business, lawsuits can arise from things like nuisance complaints, medical injuries (e.g., tinnitus, etc.), and contract law disputes.

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

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

Do I Need an LLC for a Balloon Distribution 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 Balloon Distribution Business

By starting an LLC for your balloon distribution 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.

Balloon distribution businesses will benefit from liability protection because of the risk of product liability, workplace accidents, trademark infringement, and even libel.

Example 1: After supplying balloons to a nearby kid’s party, you find out that a neighbor has filed a nuisance lawsuit against your LLC. Since you benefit from limited liability, you know that your personal assets will never be put into play if you have to reimburse the claimant.

Example 2: After renewing your LLC’s lease, you change your mind and decide that you would like to move your business to a different area. When your current building’s landlord threatens to sue you for breach of contract, you realize that your LLC may need to compensate the landlord as a result of the early termination, but your personal assets will be protected.

Example 3: After a balloon pops into a child’s ear, her parents claim that it has resulted in tinnitus, and demand compensation. If they file a lawsuit against your LLC, your personal assets will remain protected regardless of the outcome of the claim.

Example 4: A competing business sues your company, claiming that your business’s logo infringes on their copyrighted design.

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 Balloon Distribution 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 balloon distribution 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

Balloon distribution 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?

An LLC protects your personal assets– you’ll need business insurance to protect your business assets.

If you want to hire employees, you will be legally required to purchase workers’ compensation insurance.

Even if this is not the case, you will likely benefit from purchasing general business insurance if you have business assets that you want to protect.

Common Situations Business Insurance May Cover for a Balloon Distribution Business

Example 1: A customer who is stressed about their car being undrivable gets too close during loading and has their hand pinched between the car and the equipment. General Liability Insurance would cover the resulting medical payments for the injury.

Example 2: During a routine pick-up, one of your employees forgets to secure a strap that would properly secure the vehicle being towed. This results in the car detaching from the truck which causes major damage to the car. General Liability Insurance would cover the damage done to the customer’s vehicle.

Example 3: While dropping off a vehicle at an auto shop, you accidentally back the customer’s vehicle into the garage bay door. General Liability Insurance would cover the damage to the customer’s vehicle and the auto shop’s garage door.

Other Types of Coverage Balloon Distribution 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 tow truck companies should obtain.

Commercial Auto Insurance

Since you will be driving your truck on public roadways, you are mandated by the state to carry a commercial auto policy. Auto insurance protects not only your vehicle but any liability you may have in an accident. Your personal car insurance will not cover you if you are driving the tow truck, even if you are off duty.

Commercial Property Insurance

If you own your location instead of renting, you need commercial property insurance to protect the building. If your business is based out of your home, your homeowners' insurance will not cover the home when it is being used for commercial purposes. Property insurance also covers items owned by your business.

Balloon distribution businesses invest heavily in the tools that are used to complete their work. Be sure that you have enough coverage to replace all of your tools in the case of a loss.

This coverage is generally offered in a Business Owner Policy (BOP).

In addition to the policies outlined above, there are a few other types of coverage your balloon distribution business may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.

Workers' Compensation Insurance

If your balloon distribution business has any employees (full-time or part-time), you are legally required to carry workers’ compensation insurance. This type of coverage will help compensate your employees in the case that they get injured on the job.

Read more about workers’ compensation insurance.

Business Interruption Insurance

In the event of a fire, flood, or other catastrophes, there is a good chance your business operations will be halted for some time. Business interruption coverage is designed to help you recoup a portion of the revenue your business would lose due to the inability to operate.

This type of insurance is typically included in a business owner’s policy.

Commercial Umbrella Insurance

Umbrella coverage allows you to extend above and beyond the standard limits of your other business insurance policies. If you are faced with a large lawsuit or other claim situation, there’s a possibility that the coverage limits of your standard policies will be insufficient. In this case, your umbrella policy will allow you to surpass these limits.

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 and commercial auto insurance.

Read our Small Business Insurance article for more info.

The total cost of starting a balloon distribution business will depend on whether you begin working from your home or not.

You will also need to purchase an industrial helium tank, several different types of balloons, and a large vehicle which you can use in order to transport the already inflated balloons.

You will also need to invest in a business website, and will want to allocate a monthly advertising budget to help your business grow.

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

Operating expenses for a balloon distribution business include inventory, insurance, and helium tanks.

Learn more about running a balloon distribution business.

Balloon distribution businesses primarily make money by selling balloons to customers.

Learn more about starting a balloon distribution business.

A balloon distribution business provides balloons to individuals and events. Some balloon distribution businesses sell a variety of balloons, while others focus on specific offerings like balloon animals.

One good thing about a balloon distribution business is that it can be started out of your home. This greatly decreases startup costs and increases the amount of potential profit.

Learn more about starting a balloon distribution business.