Should I Start an LLC for My Dent Removal Business?

Starting a limited liability company (LLC) for your dent removal 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 dent removal business, lawsuits can arise from things like property damage (e.g., accidentally causing further damage to a customer’s vehicle while removing a dent, etc.).

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

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

a close up of a large dent on a backseat passenger car door

Do I Need an LLC for a Dent Removal 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 Dent Removal Business

By starting an LLC for your dent removal 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.

Dent removal businesses will benefit from liability protection because car repair and service businesses face a variety of risks associated with working on a client’s personal vehicle.

Example 1: After damaging a customer’s vehicle, you fire your employee, who threatens to file a wrongful termination claim against your dent removal business. Regardless of the legitimacy of the lawsuit, your limited liability will prevent you from having to personally compensate the claimant.

Example 2: You apply for a small business loan in order to purchase several new power dent pullers and expand your business. Since you didn’t personally guarantee the loan, the lender will not be able to sue you in order to recoup their investment if your business is unable to pay them back.

Example 3: When one of your employees injures himself during working hours, he asks you whether you could reimburse him. Since you believe that his accident could have been avoided if he paid attention, you decline. Weeks later, you find out that a compensation and medical damages lawsuit has been filed against your LLC. Here, limited liability will protect your personal assets regardless of how the claim progresses in court.

Example 4: While a new employee attempts to sand a repair on a client’s collector car, they lose control of the sander, leading to extensive damages on the exterior of the vehicle. The customer sues your business for the repair 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 Dent Removal 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 dent removal 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

Dent removal 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 trusted 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, even dent removal businesses, need business insurance in order to protect their assets. This is because the limited liability offered by an LLC structure protects the owners’ assets only.

Business insurance is also beneficial when it comes to protecting LLC owners’ personal assets against any wrongful acts that they’ve committed.

Common Situations Business Insurance May Cover for a Dent Removal Business

Example 1: A new employee is sanding down a repair to paint it when he loses control of the sander, causing extensive damage to the customer’s vehicle. The general liability insurance policy you carry should cover the cost of repairing the damage.

Example 2: One of your customers is walking into the shop to review the repairs to his car when he trips over an air compressor hose, falling and breaking his wrist. He asks that your business pay for his medical treatment. Your general liability insurance will likely cover this expense.

Example 3: A customer is walking from the parking lot into your shop when she trips over some broken asphalt and breaks her arm. She decides to sue your business. Your general liability insurance will cover the cost of your legal defense. It will also pay for a settlement if necessary.

Other Types of Coverage Dent Removal 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 dent removal businesses should obtain:

Workers’ Compensation Insurance

The state you do business in most likely requires employers to carry workers’ compensation insurance. If one of your employees is injured performing job-related duties, your workers’ comp policy will pay for their medical treatment. If the employee cannot work due to the injuries, the policy will help pay for lost wages while they recover.

Commercial Property Insurance

You put a lot of money into the equipment and supplies you need to operate your dent removal business. But if you lose your equipment, like if a fire were to break out and destroy it, you might have a tough time replacing it. However, if you have a commercial property insurance policy, you can file a claim with your insurer after such a loss. If the loss was caused by a covered event, you should be able to get compensation to help pay for replacement equipment.

Commercial Umbrella Insurance

The general liability insurance you carry is sufficient for protecting your business in most cases, but there are exceptions — like if your company is sued and loses a lawsuit that requires you to pay major damages. If the limits of your general liability insurance are exceeded, you could be left holding the tab. But if you have an umbrella insurance policy, it will kick in where the general liability insurance leaves off so that you do not have to pay out of pocket.

Commercial Auto Insurance

A commercial auto insurance policy is necessary for any vehicle that is used for business. With such a policy, your commercial vehicles are covered in the event of an accident. The policy will pay for fixing or replacing vehicles and for medical treatments for the injured. It will also pay your legal costs if you cause an accident and are sued by the other driver.

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.

Read our Business Insurance for Dent Removal Businesses article for more info.

You can start a dent removal business with a relatively small budget. You will need to purchase a power dent puller, as well as a variety of other tools. You may even be required to purchase a business license.

Like with most businesses, you will likely also need to invest in a business website, as well as in some form of advertising.

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

Ongoing expenses will include a variety of costs including marketing and advertising costs, equipment maintenance, rent, and employee wages.

Learn more about running a dent removal business.

Profit for dent removal services is made through the removal and repair of dents and damages to clients’ vehicles. Businesses may charge varying rates depending on the specific service and size of the project.

Learn more about starting a dent removal business.

Dent removal services remove dents and other visual imperfections from customers’ vehicles. While some dent removal services are a part of auto service shops, others travel to clients and offer direct-to-consumer dent services.

A dent removal service operating at an 80% profit margin with 300 customers a year has the potential of an average profit of $24,000 a year.

Learn more about starting a dent removal business.