Should I Start an LLC for My Funeral Home?

Starting a limited liability company (LLC) for your funeral home 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 funeral home, lawsuits can arise from things like an employee accidentally using the wrong casket or from a family member alleging that improper storage of a deceased body has taken place.

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

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

Do I Need an LLC for a Funeral Home?

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 Funeral Home

By starting an LLC for your funeral home, 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.

Funeral homes will benefit from liability protection because of the risk of property damage, workplace accidents, and financial data breaches.

Example 1: A family sues your funeral home for mishandling the cremation of their loved one. If found to be responsible, liability protection will ensure that your personal assets are safeguarded from the financial fallout of the lawsuit.

Example 2: A funeral home employee is accused of stealing valuable items from a deceased person's home during a removal. Following this, the family proceeds to sue the funeral home. Liability protection will ensure that the owner's personal assets will not be affected irrespective of the court’s ruling.

Example 3: A customer complains about the appearance of their loved one after embalming, leading to a lawsuit. Any damages or compensation associated with the lawsuit will only be covered by your business assets.

Example 4: A client gives you special keepsakes that they would like to put in the loved one’s casket. You lose these items, and the client sues you for breach of contract.

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 Funeral Home

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 funeral home 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

Funeral homes 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 limited liability protection from being an LLC protects your personal assets, not your business assets.

Insurance is a key factor for funeral homes in order to protect against potential liabilities and safeguard valuable assets (e.g., equipment, property, etc.).

Common Situations Business Insurance May Cover for a Funeral Home

Example 1: During a tour of your funeral home, a potential customer slips and injures his arm and head. Because your staff failed to display a “caution” sign, the man threatens to sue. General liability insurance would cover the man’s medical bills and any legal costs in the event of a lawsuit.

Example 2: The new sign at your parking lot entrance features your recently updated company logo. A competitor threatens a lawsuit because your new sign is too similar to their logo. General liability insurance would pay for your legal fees and any damages awarded in a settlement.

Example 3: While an employee moves supplies from a company vehicle into your funeral home, they lose control of the dolly, and it hits a customer’s car. The impact smashes the passenger door and breaks the window. Your general liability coverage would cover the vehicle repair costs.

Other Types of Coverage Funeral Homes 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 funeral homes should obtain:

Commercial Property Insurance

You’ve made major investments to outfit your funeral home with the latest equipment, furniture, and other tools to provide a high-quality customer experience. If you own the building in which your business operates, you’re responsible for all business-related property housed there in the event of a fire or other natural disaster. Commercial property insurance would cover the cost of repairing or replacing damaged computers, furniture, and other business equipment after an accident.

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 benefits stemming from a work-related accident.

Commercial Umbrella Coverage

Even the most responsible business owners can sometimes face a lawsuit that threatens to exhaust the limits of their primary insurance coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.

Commercial Auto Insurance

If you have an auto accident while running an errand for work, your personal car insurance won’t cover the damages. Commercial auto insurance covers repair costs and other damages resulting from an accident involving vehicles used as part of your funeral home business.

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 property insurance.

Read our Funeral Home Business Insurance article for more info.

A funeral home business requires equipment for embalming and cremation, caskets, clothing, cosmetic items, laborers, insurance, operating space and parking lot, viewing area furniture, and a hearse.

Visit our How to Start a Funeral Home guide to learn more about the costs of starting and maintaining this business.

Some of the main operating expenses of a funeral home are rent, payroll, equipment, and insurance.

Learn more about running a funeral home.

A funeral home makes money by charging customers for funeral and cremation services as well as caskets, flowers, urns, and other funeral-related things.

Learn more about starting a funeral home.

Unlike some other businesses that have to deal with seasonality and trends, there are always families looking for funeral services for loved ones.

The costs of opening a funeral home can be substantial, but successful funeral homes can be extremely profitable despite these expenses. After a few years, successful funeral homes can make hundreds of thousands of dollars a year.

Learn more about starting a funeral home.