Starting an LLC for Delivery Services (Full Guide & Resources) in 2023

If you own a delivery services business, you may have or may not have formed a limited liability company (LLC stands for it) for the business. The LLC is an effective option for the majority of businesses searching for asset protection, and it offers a wide array of other benefits as well.

Certainly, forming an LLC is not just the only option for your delivery business, so the objective of this article is to help you determine whether it’s the best option for your business entity. You should consider several factors when forming a corporate entity for your delivery business – therefore, let’s discuss the details of an LLC to decide if you need to form one.

What Is an LLC?

First off, let’s dive quickly into what an LLC means. AN LLC is a formal legal entity that is usually taxed like a general partnership or sole proprietorship, in that the business owners include company profits and losses to their personal returns. The LLC doesn’t owe any income taxes. It can also decide to be taxed as a corporation, although this isn’t quite a common option.

LLCs also share some similarities with corporations, especially in terms of financial responsibilities. The owners or members of an LLC are typically not accountable for the financial position of the business. This means that if a person were to sue your LLC, your personal assets wouldn’t be at risk

Do I Need an LLC for a Delivery Service?

An LLC is an easy and cost-efficient way of protecting your personal assets and saving money on taxes. You should form an LLC if there is considerable risk involved in your delivery service company or when your delivery service company could benefit from increased credibility and tax options.

LLC Benefits for a Delivery Services – Why Starting an LLC for a Delivery Services Is Important

When you form an LLC for your delivery services company, you can enjoy the following benefits:

• Limited liability protection to protect your savings and personal properties
• Access to more tax options and tax benefits such as exemption from double taxation and paying self employment taxes
• Increase the credibility of your business and more.

Let’s discuss them in much detail.

Personal Asset Protection

The main reason why business owners form LLCs is to access the personal asset protection that is offered by this business structure^[1]. Whether you operate a full-fledged delivery service company or work as a part-time delivery driver or independent contractor who drops off a couple of packages with a delivery truck, you’ll require the limited liability protections that LLCs can offer.

On the other hand, if you form an LLC for your delivery service company before you deliver your first package, and you run that LLC in a compliance manner, the lawsuit’s scope will be limited to the business assets. Essentially, your personal properties will be protected.

Taxation

Another important benefit of forming an LLC for your delivery company is taxation. An LLC offers its owners a wide array of options to choose from, including how they’d like their LLC taxed. Forming an LLC can help to save money rather than just operating as an informal business entity.

General Partnership/ Sole Proprietorship

A delivery LLC is usually taxed as a general partnership (multi-member LLC) or as a sole proprietorship (single-member LLC), which is the default choice. This tax structure helps to prevent from paying taxes – instead, the profits go through the company and you pay taxes when you’re filing your personal taxes, just like with a sole proprietor or general partners.

C Corporation

LLC owners can elect for their own LLC to be taxed as a C corporation. However, this option is very common as it subjects you to double taxation. This tax treatment means that your profits will be taxed on the corporate level as well as on the personal level when you receive them as the owner.

S Corporation

A few limitations exist for picking the S corp taxation, but the majority of delivery businesses based in the US can meet them comfortably. These limitations include, the business can only have less than 100 owners, these owners have to be either residents or citizens of the US, commercial driver’s license and a few others.

S corp taxation helps your business to save resources by decreasing the self-employment tax burden. Rather than pay a self-employment tax of 15.3% on the business’s taxable income, with S corp taxation, you can pay a reasonable salary to yourself for your role and reinvest the balance into your LLC without having to pay this tax.

Name Uniqueness and Enhanced Consumer Trust

Lastly, an LLC business structure can help to improve your delivery business’ credibility. Informal businesses don’t have exclusive assumed business names and are registered under the owners’ personal names.

With a limited liability company, the delivery service business not only possesses the rights to the exclusive use of a particular business name but also has the phrase LLC in their business names. This offers your delivery service company lots of respectability and consumer trust because clients do respect the professionalism that is shown by an LLC. Besides, a client will be at peace writing a check to a formal business instead of an individual.

How to Starting an LLC for a Delivery Service in 2023

For LLCs, the formation process is different depending on the state you intend to form your company in. However, this process has several common steps that have to be undertaken regardless of the state that your delivery business is located in. Here is a summary of the LLC formation process for any state:

Choose a Name for Your Delivery Service, LLC

The first step in the LLC formation service is choosing the ideal name for your novel entity. Here, you should ensure that the name represents your brand and what you do as a business. Also, you want to make sure that the name is not already in use. You can do so by checking the business database of your state.

Choose Your Registered Agent

Typically, the registered agent service for your LLC is responsible for receiving all the legal paperwork from the state (such as annual report reminders, service of process, tax purposes, etc.) on your behalf and submitting them to you. The registered agent makes sure that your state has a reliable and available point of contact for your company at all times.

File Articles of Organization

Articles of organization are the forms used to form an LLC, although the name varies from state to state (some call it the Certificate of Formation). You must provide your state with basic information regarding your delivery business as well its owners. In return, your state will create your LLC formally.

Create an LLC Operating Agreement for a Delivery Service

The majority of states in the US don’t necessarily need operating agreements but each LLC ought to have one regardless. An operating agreement is an internal document that explains the main operational aspects of a business. The role of an operating agreement is to avoid ownership conflicts down the line by clearly outlining how the company will be managed.

Obtaining an EIN

The Employer Identification Number (EIN) is the federal tax ID number that acts as the Social Security number for your business. AN EIN enables your company to hire staff workers, apply for bank loans, pay taxes, and so much more. You can obtain an EIN for free from the Internal Revenue Service (IRS).

More so, some states such as New York and Arizona^[2] require business owners to publish their LLC formation in the newspapers.

The Top 2 LLC Services for Delivery Services

Three key options exist for forming your delivery LLC:

• You can use the DIY method
• Can employ the services of an attorney
• You can employ the services of an online LLC formation service

Using the DIY method can be a daunting task and if you’re not used to the process, it could be quite frustrating, especially the ongoing expenses. Also, when it comes to hiring the services of an attorney, many businesses with low startup costs cannot afford to spend thousands of dollars or such a change on an attorney.

This brings us to the third option – employing the services of an online formation service. There are myriads of renowned companies providing this service presently, and they can help you save money as compared to hiring an attorney. Moreover, although these formation companies don’t bear the same expertise and experience as an attorney does, they still offer more convenience as compared to using the DIY route.

If you’d like to take a look at some of the top options for forming an LLC for your delivery business, here are the top two LLC business formation companies with great accounting software that you should consider:

ZenBusiness

ZenBusiness is a business formation company that essentially offers everything a new delivery LLC needs. If you’re looking for the best value overall from a company that is socially conscious, then you should consider ZenBusiness. They usually charge a low LLC cost of $39 for business formation and they provide one year of registered agent services as well as a highly customizable operating agreement and business card. What’s more, they have reliable and responsive customer support.

Northwest Registered Agent Service

Northwest is quite costly as compared to other players in the business formation market. However, they are more thorough with their work as they scan all the paperwork locally on behalf of your delivery LLC. If you’re looking for outstanding premium customer support from an established firm, then Northwest is your best bet – they have the best customer support, team. They also charge $225 to form your LLC while offering free registered agent service.

Final Thoughts

Limited liability companies are a great blend of tax benefits and protection with flexibility^[3]. They provide a wide array of taxation options while offering business owners personal liability protection. Delivery services LLCs are the best option for small businesses because there is minimal complexity and hassle in their functioning.

However, before you make the final call, it is important that you consult your lawyer or accountant. You also want to use a dedicated business bank account for your delivery company to obtain personal asset protection. The reason for creating distinct bank accounts is that when you mix your business accounts and personal finances, your personal assets could be at risk if your business was to be sued.

Frequently Asked Questions (FAQs)