Do I Need an LLC for My Pool Installation Business?

Starting a limited liability company (LLC) for your pool 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 pool installation business, lawsuits can arise from things like property damage inflicted onto a customer’s car by an employee, or an inability to complete a project by the agreed deadline.

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

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

Should I Start an LLC for My Pool 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 Pool Installation Business

By starting an LLC for your pool 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.

Pool installation businesses will benefit from liability protection because of the risk of being sued for personal injuries, property damage, and trademark infringement.

Example 1: You pack your pool installation equipment into a pick-up truck, but you are unaware that the cargo bed was not properly shut. While you drive, it flings open and damages someone's car. If the car owner decides to sue for damages, your business may be affected by the lawsuit, but you will be safe.

Example 2: A hotel hires you to install a pool. While your employees are working, they mistakenly damage the surrounding patio. The hotel claims that you caused their business an inconvenience and proceeds to sue. Here, your business may pay damages, but limited liability will protect your personal assets.

Example 3: You hire contractors to help with your pool installation jobs. After falling on hard times, your business is unable to pay one such contractor the full agreed-upon amount. If he sues, your business may be liable, but you will remain safe.

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 Pool 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 pool 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

Pool 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 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 the limited liability protection from an LLC protects your personal assets, not your business assets.

Pool installation businesses will need insurance to cover risks such as damages to installation equipment, employee injury, and client lawsuits.

Common Situations Business Insurance May Cover for a Pool Installation Business

Example 1: As you and your team install a pool at a client’s home, one of your employees fails to see the client and accidentally knocks him over. The client sustains a concussion and decides to sue your business for damages. General liability insurance would pay for your legal defense and any required settlement.

Example 2: A competitor files a lawsuit against your business, claiming you libeled her company in your last marketing campaign. While you disagree with the accusation, you know you need a lawyer right away. General liability insurance would cover your legal defense costs and any required settlement.

Example 3: As an employee pulls tools out of a truck parked next to a client’s car, he accidentally rips a gash in the side of her luxury sedan. General liability insurance would cover the client’s vehicle repair costs.

Other Types of Coverage Pool 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 pool installation businesses should obtain:

Workers’ Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their 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 workplace accident.

Professional Liability Insurance

While you provide quality work when installing pools, there’s always a chance someone might decide you made a mistake that caused them harm. If a client sues your business for negligence, professional liability insurance would cover your legal fees and any required settlement.

Commercial Auto Insurance

Any vehicle you use primarily for your pool installation work 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 equipment you carry in your vehicle.

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, workers’ compensation insurance, and commercial auto insurance.

Read our Business Insurance article for more info.

The initial capital to start a pool installation business ranges between $39,900 and $65,000.

You will need this money to purchase supplies, equipment, and building materials. However, if you plan to extend services to pool cleaning, you will need to budget an additional $2,000 or more to acquire cleaning equipment.

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

Some of the ongoing expenses for a pool installation business include employee wages, materials, and equipment maintenance and replacement costs.

Learn more about running a pool installation business.

These businesses make money by charging different rates for a variety of pool-related services, such as installation, maintenance, and repairs.

Learn more about starting a pool installation business.

Pool installation businesses install pools for residential and commercial customers. While some of these businesses strictly focus on installation, others also provide post-installation repair and maintenance services.

A decent-sized pool installation business has the ability to generate up to $200,000 in annual profits.

Learn more about starting a pool installation business.