Should I Start an LLC for My Bike Repair Business?

Starting a limited liability company (LLC) for your bike repair 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 bike repair shop, lawsuits can arise from things like bike accidents as a result of an insufficient repair, as well as accidental bike damage while repairing a bike.

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

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

Do I Need an LLC for a Bike Repair 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 Bike Repair Business

By starting an LLC for your bike repair 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.

Bike repair businesses will benefit from liability protection because of the risk of lawsuits for personal injuries, property damage, and libel.

Example 1: When one of your bike repair work stands collapses, an ebike falls on your employees foot, resulting in a small fracture. In this case, the limited liability offered by your LLC structure will protect your personal assets if a lawsuit arises.

Example 2: After repairing and delivering a bike to one of your customers, you find out that the bike malfunctioned mid-ride, leading to an unfortunate collision. If the customer was to sue your LLC in an attempt to seek compensation and medical damages, you would not be personally liable as a result of your LLC structure as long as it wasn’t your own negligence that caused the collision.

Example 3: After multiple arguments, you decide it's time to terminate one of your employees contracts. When they find out, they claim that this is completely unjustified, and threaten to take you to an employment tribunal. Regardless of the validity of the lawsuit, limited liability would ensure that you would not be personally liable for compensating the claimant in such a case.

Example 4: A customer sues you, claiming that you did not properly repair their bike, causing it to break and injure them.

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 Bike Repair 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 bike repair 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

Bike repair 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?

LLCs need insurance in order to protect the businesses assets.

Having said that, you should keep in mind that all LLC owners’ assets are inherently protected from the limited liability offered by the business structure.

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

Common Situations Business Insurance May Cover for a Bike Repair Business

Example 1: A customer asks to take a bike out for a test ride. He loses control and falls off the bike, breaking his arm. He sues your business. Your general liability insurance will pay for your legal fees, including a settlement if one is necessary.

Example 2: The child of a customer is exploring your shop while you talk to her father. She falls into a stack of tools and equipment, sustaining injuries that require medical care. Her father asks that you pay for her treatment. Your general liability insurance would likely cover this expense.

Example 3: A competing bike repair shop has sent you a letter, claiming you slandered their business when you spoke to the local news station. They intend to file a lawsuit. Your general liability insurance will pay for an attorney and cover the cost of a settlement if one is necessary.

Other Types of Coverage Bike Repair 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 bike repair businesses should obtain:

Commercial Property Insurance

All of the supplies and equipment you have invested in to operate your bike repair shop would be costly to replace if you were to lose them in a fire or other unexpected event. But if you have commercial property insurance, you can file a claim with your insurer as long as the loss was caused by a covered event, and you should be able to get money to help with replacement costs.

Professional Liability Insurance

There is always a chance that a customer could claim that your work caused them injury. If you are sued by a customer, for example if a customer claimed you made a mistake in your repair work that caused her injury, your professional liability insurance would pay for your legal costs.

Workers’ Compensation Insurance

Most states require employers to carry workers’ compensation insurance, so if you have employees, chances are you need a workers’ comp policy. If an employee is hurt performing job-related duties, the policy will pay for his or her medical treatment. The policy will also pay for lost wages If the employee cannot work while they are recovering.

Product Liability Insurance

If your business sells products, like bike accessories, a product liability policy will protect you in case a customer claims one of your products caused him or her injury. If a customer sues your business over a product you sold, your policy would cover the cost of hiring an attorney. It would also cover the cost of paying a settlement if you needed to settle the case out of court.

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 property insurance.

Read our Bike Repair Business Insurance article for more info.

You can start a bike repair business on a relatively small budget. You will need:

Specialized and basic tools (e.g., tire spoons, chain breakers, open wrenches, hex keys, etc.).
Work stands
Truing stands

When it comes to maintenance, you will likely have to pay for a lease (unless you start working from your house), employees’ salaries, and utilities.

Visit our How to Start a Bike Repair Shop guide to learn more about the costs of starting and maintaining this business.

Payroll, lease payments, utilities, and inventory upkeep represent the primary ongoing expenses.

Learn more about running a bike repair shop.

A bike repair business charges customers to repair their bikes. Some also sell bikes and bike accessories.

Learn more about starting a bike repair shop.

A bike repair business fixes bikes, sells spare parts, and offers instruction on bike maintenance. Bike repair businesses can earn significant profits, depending on how much repair work they complete, how many bikes and bike accessories they sell, and its overhead costs.

Learn more about starting a bike repair shop.