LLC for Roofing Companies

Do you need an LLC for roofing?

If you’re considering starting a roofing business, you might be wondering whether forming a limited liability company (LLC) is necessary or beneficial for your venture. In this guide, we’ll explore the key considerations and advantages of forming an LLC for your roofing business. Forming an LLC for your roofing business can offer several benefits that provide protection and structure to your operations. One of the primary advantages of forming an LLC is the limited liability protection it provides. By establishing your roofing business as an LLC, you can separate your personal assets from the liabilities of your business. 

LLC status can also enhance your professional image in the eyes of clients, suppliers, and potential partners. It also gives you the benefit of tax flexibility, letting you choose the tax structure that works best for you. 

In this guide, we’ll walk you through the process of starting a roofing LLC, including the vital steps to complete along the way. Whether you’re an experienced roofer looking to formalize your business or considering entering the roofing industry for the first time, forming an LLC can be a crucial step toward building a successful and sustainable roofing business.

Why Starting an LLC for a Roofing Business Is Important

Personal Asset Protection

The top reason to form an LLC for a roofing company is to gain access to the personal asset protection provided by this business structure. Whether you operate your roofing company as a solo operation or if you have partners or employees helping you out, you need the limited liability protections that an LLC can provide.

As an example, let’s say that you build a new roof for a customer, but you make mistakes that cause water to leak into the home when it rains, causing massive damage to the house. If you operate your roofing business as a sole proprietorship or general partnership, your personal assets — like your house, car, or personal bank accounts — would be at risk if that customer decides to sue your business. This can happen to commercial roofing companies and small residential roofing groups alike, and general liability insurance might not be enough to protect you.

On the other hand, if you form an LLC for your roofing business, and you operate and maintain that LLC in a compliant fashion, the scope of your customer’s lawsuit will be limited to your business assets. In other words, your personal assets will be protected by the business structure you’ve chosen.

Taxation

However, this is just one of the advantages of the LLC for a roofer. Another important aspect is taxation. The LLC actually provides its owners with a selection of options regarding how they want the business to be taxed, which can potentially save you a considerable amount of money compared to simply operating as an informal business entity.

Sole Proprietorship/General Partnership

Your roofing LLC can be taxed as a sole proprietorship (for single-member LLCs) or general partnership (for multi-member LLCs), which is the default option. With this tax structure, your roofing business itself does not pay taxes, but rather the profits are passed through the business entity and your owners pay taxes on that money when they file their own personal taxes.

C Corporation

You can also choose for your roofing business to be taxed as a C corporation, although this option isn’t very popular because it subjects your business to what’s known as double taxation — meaning that your profits are taxed first on the corporate level and again on the personal level when they’re distributed to your owners.

S Corporation

The other option is S corporation taxation. There are quite a few limitations to electing S corp taxation, but most U.S.-based roofers have no trouble meeting these requirements — your business cannot have more than 100 owners, they all must be either residents or citizens of the United States, and so on.

S corp taxation can help your roofing business save money by reducing your self-employment tax burden. Instead of paying self-employment taxes (a 15.3% tax that includes the employer and employee portions of Medicare and Social Security) on all of your business income, you can pay yourself and your co-owners a reasonable salary for your roles and only pay self-employment tax on that portion of your income, while you can reinvest the rest of it into your business without paying this tax.

Compared to operating a sole proprietorship or general partnership as a roofer, the S corp taxation model can potentially save you quite a bit of cash that you can use to buy materials and tools for your business rather than writing a big check to Uncle Sam.

Enhanced Credibility and Name Uniqueness

Finally, an LLC structure can enhance the credibility of your roofing business venture. Informal business entities don’t have exclusive assumed business names and typically operate under the personal name(s) of their owner(s). For instance, if your name is Johnny Smith and you operate a sole proprietorship as a roofer, your company’s name is also “Johnny Smith,” which obviously isn’t a great name for a roof repair and installation business.

In this scenario, you could register a DBA (doing business as) name to give your business the ability to operate under an assumed business name, but DBAs have no exclusivity regarding their naming rights in many states. This means that if another roofing company wants to use your DBA name as their own, they’re not only allowed to do so, but they can actually register a formal business entity with that name, preventing you from continuing to use your own assumed name.

With an LLC, you not only have the rights to exclusive use of a business name, but you will also have either the phrase “limited liability company” or the letters “LLC” in that business name. This provides your business with a jolt of respectability because customers respect the professionalism displayed by an LLC. Also, they typically feel more comfortable writing checks to a business entity rather than to an individual.

What is an LLC?

LLCs are formal legal entities that are typically taxed similarly to sole proprietorships and general partnerships, in that the owners include any company profits or losses in their personal returns — the LLC itself does not owe income taxes.

A roofing services LLC may also elect to be taxed like a corporation, although this is not a very common option.

There are similarities to corporations, too, especially when it comes to financial responsibilities. In an LLC, the owners (known as members in an LLC) are not usually personally accountable for the financial status of the business. This means that if someone sues your LLC, your personal assets are not at risk.

How to Start a Roofing LLC

The formation process for LLCs varies depending on which state you’re forming one in, but in general, the process has some universal steps that need to be taken no matter what state your business is located in. If you want a comprehensive overview of all the steps required to form an LLC, check out our complete LLC guide on the topic. The basic steps in the LLC formation process in any state are as follows:

1. Choose an LLC name

Coming up with the perfect name for your new LLC is an important step for roofing businesses. You’ll need to choose a name that represents your company and describes what you do, and you’ll also have to make sure it isn’t already in use by checking your state’s business database.

2. Designate a registered agent

Your LLC’s registered agent (which can be an individual or a professional service) is responsible for receiving important document deliveries from the state — like service of process or annual report reminders — and forwarding them to you. The registered agent ensures that the state always has a reliable point of contact for your business.

3. File your formation documents with the state

The form used to create an LLC is usually called the Articles of Organization, although the name can vary (some states call it the Certificate of Formation or something similar). You’ll need to provide the state with some basic information about your business and its owners. In exchange, the state will formally create your LLC.

4. Acquire an EIN

The Employer Identification Number (EIN) is a federal tax ID number that essentially functions as a Social Security number for a business. The EIN allows your business to hire employees, pay taxes, apply for bank loans, and more. You can obtain an EIN from the Internal Revenue Service free of charge.

5. Create an LLC operating agreement

Most states don’t require operating agreements, but every LLC should have one regardless. This is an internal document that outlines several key operational aspects of your LLC. The value of the operating agreement is how it can help prevent ownership disputes down the line by clearly explaining how the LLC will be run.

6. File a BOI report

Beginning in 2024, LLCs are required to file a beneficial ownership information report. This report, filed with the Financial Crimes Enforcement Network (FinCEN), details information about your beneficial owners. A beneficial owner is anyone who holds 25% or more of the LLC’s ownership interest, gets substantial economic benefit from it, or exerts control over it. 

By requiring this information from all LLCs, FinCEN hopes to deter financial crimes like money laundering. It’s free to file the BOI report online. 

7. Create a financial infrastructure

You will need a business bank account for your LLC, and you’ll probably want a business credit card for work-related expenses as well; a separate account can help ensure that you keep your personal and business finances separate. It’s also a good idea to use accounting software like QuickBooks or even hire an accountant to handle your bookkeeping for you.

8. Handle taxes, licenses, and permits

Depending on your state, you may need a general business license to operate your LLC in compliance with state requirements. The industry-specific licensing requirements for roofing companies vary by state, but most states do have regulations mandating licenses for roofers. Don’t forget to check with your state to see if there are franchise or privilege taxes assessed on LLCs, and also see if your municipal and/or county government entities have any further licensing requirements.

9. Understand maintenance requirements (annual reports, franchise taxes, etc.)

Again, these requirements can vary by state, but most states require some sort of regular report to ensure that your LLC’s info is up to date in the state’s business database. Some states require reports each year, while others only require them biennially or not at all. No matter what your state requires, you’ll need to stay on top of it to keep your LLC in good standing.

Additional Resources for Starting a Roofing Business

1. National Roofing Contractors Association (NRCA)

If you’re a roofer based in the United States, this is the organization for you. The NRCA provides its members with a vast array of resources and educational tools, and they also have a member directory to help you network with fellow roofers. This organization also advocates for roofers with lobbying efforts as well as public marketing campaigns.

2. Roofing Contractor

Roofing Contractor is the official publication of The International Roofing Expo, and it’s an excellent source of information for roofers. Their magazine is stuffed with exclusive articles written by industry leaders, and they also maintain a regularly updated blog, along with an industry events calendar and much more.

3. 10 Roofing Blogs to Follow (Broadly)

Staying up to date by reading relevant industry blogs is a great way to keep your roofing knowledge sharp, and this great list from Broadly points out over 20 of the best blogs in the roofing world. No matter the scale or scope of your roofing business, you’ll find plenty of valuable info in these blogs.

4. GAF

GAF is North America’s largest manufacturer of roofing materials, so it’s extremely likely that you’ll be using their products at some point as a professional roofer. They also have a welcome collection of resources and tools to help roofers hone their skills and develop their businesses. Just head over to their “Contractor Zone” for more info.

5. Equipter

Equipter manufactures a broad selection of equipment that can make your life easier as a roofer, as their products mostly revolve around debris removal. Their collection of dumpsters and trailers can dramatically simplify the cleanup process on your roofing jobs. In addition, their blog has some helpful posts, like the “15 Roofing Resources Contractors Need to Bookmark” article.

Try ZenBusiness for Forming a Roofing Company LLC

Starting a roofing business as an LLC can feel like an overwhelmingly busy time, but you don’t have to navigate the process alone. Here at ZenBusiness, we specialize in handling the “red tape” side of business. Whether you need help starting your LLC, managing your finances with a streamlined Money app, or anything in between, we can help. Let us handle the paperwork so you can focus on what you love: creating and installing beautiful roofs.