Last Updated: May 14, 2024, 12:21 pm by TRUiC Team


Should I Start an LLC for My Bus Tour Business?

Starting a limited liability company (LLC) for your bus tour 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 bus tour business, lawsuits can arise from things like car accidents involving your bus that injure any tourists aboard or damages the vehicle of the party involved in the crash.

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

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

A touring bus full of passengers

Do I Need an LLC for a Bus Tour 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 Bus Tour Business

By starting an LLC for your bus tour 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.

Bus tour businesses will benefit from liability protection because of the risk of personal injuries, property damage, or trademark infringement. 

Example 1: A competitor is suing you, claiming your advertisements have slandered them. Your business’ status as an LLC protects your personal assets with limited liability from being used to pay for the settlement.

Example 2: You take out a small business loan to buy more buses for your business but end up defaulting on your payments. Being an LLC, limited liability would protect your personal assets from being seized.

Example 3: While pulling in from a tour, one of your buses backs into a customer’s vehicle and they demand your business pay for the repair costs. Limited liability from your LLC status keeps your personal assets out of the discussion, only allowing business assets (or insurance) to be used for the costs.

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 Bus Tour 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 bus tour 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

Bus tour 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 loansgrants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

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?

All businesses need insurance to protect their business assets — even LLCs. This is because limited liability protection from being an LLC protects your personal assets, not your business assets.

Having insurance will protect important assets to your business, like your tour busses, if they were ever damaged or in an accident, helping cover the cost so you can get back to work sooner.

Common Situations Business Insurance May Cover for a Bus Tour Business

Example 1: As one of your drivers loads a passenger’s luggage, he accidentally drops a bag filled with expensive camera equipment. General liability insurance would pay to replace the passenger’s damaged property.

Example 2: While exiting the bus, a passenger falls off the staircase, hits her head, and suffers a concussion. She decides to sue your business for damages. General liability insurance would pay for your legal defense costs and any required settlement.

Example 3: When a passenger gets trapped in the bathroom on the bus and suffers an asthma attack, she needs immediate medical treatment. She demands you pay for her medical care. General liability insurance would cover her medical treatment.

Other Types of Coverage Bus Tour 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 bus tour businesses should obtain.

Commercial Auto Insurance

Any vehicle you use primarily for business requires commercial auto insurance to protect the vehicle, driver, and others on the road in the event of an accident. Be sure to select a policy that covers not only accident-related vehicle repair costs and medical treatment for anyone injured, but also sufficient protection for any business materials you carry in your vehicle.

Workers’ Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover, but also any disability or death benefits stemming from a work-related accident.

Commercial Property Insurance

You made a major investment in your business supplies, equipment, and real estate. In the event of a fire, theft, or natural disaster, commercial property insurance would cover the cost of repairing or replacing your business-related property. This includes structural damage to your building as well as your business equipment and supplies.

Commercial Umbrella Insurance

While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.

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.

A bus tour business requires at least one tour bus. Plan on spending at least $5,000 to $10,000 on a used bus, however, most tour buses of moderate size will sell in the rage of $30,000 to $60,000. 

Expect ongoing costs to include:

  • Around $500 monthly for commercial auto insurance.
  • Around $300 in weekly gas trips per bus.
  • $20-$40 per hour for mechanic fees.

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

Fuel and bus maintenance will be significant ongoing costs. You will also have to pay for marketing, insurance, and employee salaries.

Learn more about running a bus tour business.

A bus tour business makes a profit by selling bus tours to individuals and groups.

Learn more about starting a bus tour business.

Bus tours provide a guided look at tourist destinations. These can be for individual tourists, or they can be for large groups such as businesses or school trips.

A bus tour business’s location and the number of buses it operates factor heavily into its potential profits.

Learn more about starting a bus tour business.

Related Articles

Article Sources

IRS: Limited Liability Company

IRS: S Corporations

IRS: EIN

SBA: Small Business Guide

SBA: Choose a Business Structure Guide

US Census Bureau: Small Business Statistics

SBA Office of Advocacy: Data on Small Business

FRED: SBA Data for Small Business