Do I Need an LLC for My Electronics Repair Business?

Starting a limited liability company (LLC) for your electronics 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 an electronics repair business, lawsuits can arise from things like accidentally damaging a customer’s electronic device while attempting to repair it or expensive refund requests from unsatisfied customers.

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

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

Person wearing gloves and repairing a cell phone

Should I Start an LLC for My Electronics Repair Business?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should start 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 an Electronics Repair Business

By starting an LLC for your electronics 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.

Electronics repair businesses will benefit from liability protection because of the risk of product liability, trademark infringement, financial data breaches, property damage, and even workplace accidents.

Example 1: While moving a client’s computer to your desk, you accidentally trip and drop it, causing further damage. The client asks you to cover the new repair costs. Being an LLC, limited liability will protect your personal assets as the owner of the business from being used to cover the cost.

Example 2: A customer comes in to pick up their repaired device and trips over some furniture. They fracture their shin and are attempting to sue your business. Your personal assets could not be taken in the settlement since your business is an LLC, and they are protected.

Example 3: An employee damages a customer’s vehicle while they load their order. The customer asks for you to pay the cost of the repair. Limited liability as an LLC protects your personal assets from being used to cover any resulting expenses.

Example 4: While moving a client’s computer to your desk, you accidentally trip and drop it, causing further damage. The client asks you to cover the new 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 an Electronics 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 an electronics 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

Electronics 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 dependable 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 because your business’s personal assets are unprotected without it. Being an LLC only protects the personal assets of the owner with limited liability.

Electronics repair businesses need insurance because of the liability involved in working on other people’s devices. Insurance can help cover the cost of any accidents or mishaps that occur while working on repairs.

Common Situations Business Insurance May Cover for an Electronics Repair Business

Example 1: An overnight storm tears a hole in the roof of your building, allowing rain to soak some high-end electronics a customer left with you to repair. General liability insurance would cover the cost of replacing the customer’s damaged property.

Example 2: While bringing a television in for repair, a customer trips in your entryway, breaks an ankle, and decides to sue your business. General liability insurance would pay for your legal defense and any required settlement.

Example 3: After slipping and falling on some wet flooring in your restroom, a customer demands your business pay for her medical treatment. General liability insurance would cover her medical bills.

Other Types of Coverage Electronics 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 electronics repair businesses should obtain.

Professional Liability Insurance

While you strive to deliver the highest level of service for your clients, there’s always a chance someone might claim your professional services caused them harm. If a customer sues your business, claiming you made a mistake, professional liability insurance would cover your legal fees and any required settlement.

Commercial Property Insurance

You made a major investment in the supplies and equipment you use to repair electronics. 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 and the business materials you store there.

Workers' Compensation Insurance

If you have any employees, most states will require you to carry workers’ compensation insurance for both part-time and full-time workers. 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 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.

At a minimum, you’ll need general liability insurance and commercial property insurance.

Read our Electronics Repair Business Insurance article for more info.

The costs for opening this type of business are lower than many other types since it can be operated out of a home, and many services can be done remotely. Tools, diagnostic equipment, and software are your biggest expenses.

Ongoing costs are mostly replacing and maintaining equipment, as well as keeping your software up to date.

Visit our How to Start an Electronics Repair Business guide to learn more about the costs of starting and maintaining this business.

Operating expenses for an electronic repair business include rent, repair equipment replacement, insurance, and potentially payroll.

Learn more about running an electronics repair business.

Electronics repair businesses make money by charging customers to repair electronic devices. Some also sell parts or entire devices.

Learn more about starting an electronics repair business.

An electronics repair business fixes and maintains various electronic devices for customers, including cell phones, computers, and televisions.

An electronics repair business can be started relatively inexpensively, as it doesn’t need to purchase a lot of inventory and can operate out of a small space. This means the business can quickly turn a profit if it can attract customers.

Learn more about starting an electronics repair business.