Do I Need an LLC for My Floor Installation Business?

Starting a limited liability company (LLC) for your floor installation 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 floor installation business, lawsuits can arise from things like an unsatisfied customer having to repair a floor you installed and demanding indemnification or from an employee accidentally damaging a customer's property.

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

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

Should I Start an LLC for My Floor Installation 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 a Floor Installation Business

By starting an LLC for your floor installation 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.

Floor installation businesses will benefit from liability protection because property improvement and installation businesses, including floor installation businesses, face a variety of risks associated with employee and client safety throughout the processes of installing and removing flooring.

Example 1: A customer sues your floor installation business for installing a faulty floor that buckles after a few months. Because your business is operating as an LLC, only the assets of the business will be used to pay for any damages or legal fees associated with the lawsuit if the business is found to be liable.

Example 2: A customer sues your floor installation business for damaging their furniture during the installation process. Liability protection will ensure that your personal assets are shielded from any fees associated with the lawsuit.

Example 3: A customer sues your floor installation business for failing to complete the installation on time, causing them to incur additional expenses for temporary flooring. Regardless of the court’s ruling, your personal assets will not be affected.

Example 4: One of your employees fails to properly secure some tile pieces in a client’s kitchen. A tile becomes loose and the client slips, resulting in a trip to the hospital. They ask you to cover their medical fees.

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 Floor Installation 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 floor installation 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

Floor installation 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 to protect their business assets — even LLCs. This is because the limited liability protection from an LLC protects your personal assets, not your business assets.

This is especially important for businesses that may be at risk of causing damage to property or causing injuries to individuals during the installation process.

Common Situations Business Insurance May Cover for a Floor Installation Business

Example 1: You have removed the old floor but have not installed the new flooring yet. The client tries to enter the property and falls due to uneven footing. They file a legal claim against your business. Your general liability policy will cover your legal defense costs, including the cost of a settlement if the case is decided out of court.

Example 2: One of your employees loses control of a dolly while moving tiles from a truck to the property. The heavy boxes of tiles fall on the client’s elaborate landscaping, smashing lighting installations and exotic plants. The general liability policy you carry will likely cover the replacement and repair costs for the damage done to the client’s property.

Example 3: A competitor claims that you are using a logo that is too similar to theirs and takes legal action against your business. Your general liability policy will cover the costs of your legal defense and the costs of paying damages to the competitor if you are found liable, up to your policy limits.

Other Types of Coverage Floor Installation 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 floor installation businesses should obtain

Commercial Auto Insurance

Getting your employees, installation equipment, and flooring materials to the job site requires company vehicles. Every vehicle that is used for business purposes should have commercial auto insurance. The commercial auto policy you carry will help you meet legal requirements while also providing financial assistance in the event of an accident.

Commercial Property Insurance

Damage to your commercial property, such as tools, equipment, and flooring supplies, can be extremely expensive. Whether it is a fire or another situation that leads to extensive property loss, your commercial property insurance coverage will mitigate the financial burden on your business by helping cover the costs of replacement.

Workers' Compensation Insurance

Installing flooring is hard work. Injuries can happen at any time, whether from heavy lifting, power tool use, improper use of chemicals, or other accidents. A workers’ compensation policy helps you to cover the costs of workplace-related injuries and lost wages when an employee is unable to work due to injuries or illnesses suffered at work. Carrying workers’ compensation insurance is typically required by law, although specific laws vary by state.

Commercial Umbrella Insurance

A general liability insurance policy has specific limits that may not be high enough to cover the costs required to protect your business. Commercial umbrella insurance is designed to supplement general liability insurance. If you find yourself in a situation where the damage is significant enough to exceed your general liability policy, commercial umbrella liability insurance will help to pick up the slack.

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, workers’ compensation insurance, and commercial auto insurance.

Read our Business Insurance for Floor Installation Businesses article for more info.

A floor installation business will need insurance, a small shop, startup materials, and employee wages. Insurance premiums can cost $361–$839 per year, while the shop's rent can cost $3,000–$5,000 per month. Startup costs, including materials and wages, may total $10,000–$30,000.

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

Some of the main ongoing expenses for floor installation businesses include equipment maintenance and raw material purchases. Other costs will include payroll, advertising, and marketing costs.

Learn more about running a floor installation business.

Most profit stems from the installation costs of hardwood, carpet, and tile flooring for clients.

Learn more about starting a floor installation business.

Floor installation businesses provide a variety of flooring services to residential and commercial properties looking to install, remove, or perform maintenance on their property flooring. Businesses cover a large list of installation options for a variety of properties including homes, apartments, shops, malls, and business establishments.

On average, mid-sized floor installation businesses can see up to six-figure profits in their first year.

Learn more about starting a floor installation business.