How to Form a Legal Cleaning Business
When starting a cleaning business, there are some legal aspects involved, as with any business. There are things you have to do on a town, state, and sometimes even federal level. So making sure you have all of the legal aspects of your business set up is going to be very important, and something you are going to want to get done from the start.
So what exactly do you need to make your cleaning business ‘legal’? Well it would be a very long post if I listed what you have to do exactly for each state, so I am going to give what you typically will need to do. But since this is not a law website, I can’t confirm the information on this post. So I highly recommend you also request information from your town and state that you are located in for a more clear, accurate, and up to date information. But, I am going to go through what you should expect to get, almost everywhere.
One last thing before I start, I am not a lawyer and I always recommend legal help through a licensed attorney. I can’t guarantee anything below, due to it varying from place to place. Alright, that is enough for my disclaimer, now lets get started. :)
Step One: Find a Legal Name
I won’t go in depth here as I already went over how to find and create a legal business name in our post on creating a cleaning business name. There you will find the tools you need and tips for creating a legal business name that you will legally be able to use for your cleaning business.
Step Two: Figuring Out the Business Form
There are four common types of business forms. Here are all four:
- Sole Proprietorship
- Limited Liability Company (LLC)
All have there benefits, and all also have there downfalls. For the start of any cleaning business, you probably won’t need to form a corporation, nor do I think you would want to. It requires a lot of paperwork, has double-taxation (once as a business, and then anything paid to you is taxed again), and just isn’t a reasonable way to go with a small cleaning business. Of course, if your plan is to eventually run a large cleaning company then one day it may make sense to form a corporation. But to start off, you seriously do not need to go through the hassle.
So, which should you choose then? A sole proprietorship, partnership, or an LLC? Let me say right away, the only reason you would make a partnership is if you are going into business with someone else, and that other person is going to own part of the business and its profits. This is the only thing different between a sole proprietorship and a partnership, is there is more than one owner. Make sure to write up and partnership agreement if you are going to do this, otherwise you could have legal issues later on!
Now, what is a sole proprietorship? Quite simply it is a business that is owned by one person, which is not a separate legal entity. What this means is that if you incur any debts or liabilities, and you for some reason don’t pay them off, your personal assets are at risk. Of course this isn’t a huge issue considering you should not be taking on many loans when starting off (if any at all), but it is one of the downsides of a sole proprietorship. The benefits are that it really doesn’t take anything to form it and income is taxed on your personal taxes. But what if you want the legal protection from liabilities that your business may incur? Well, read on!
Limited Liability Company, or LLC, is what you are looking for. This gives you the legal protection of a corporation, but is similar to a sole proprietorship. It does take more doing than a simple sole proprietorship, but if you are scared of legal action against you, you may want to consider an LLC. For information on forming an LLC, please read here.
My personal input on which to choose (which again you should consult with an attorney before doing so), sole proprietorship / partnership or an LLC, is that if you can afford an LLC I would do so. It gives you a little more credibility for being a ‘legitimate business’ as well as that legal protection we were talking about. But, if you can’t or simply don’t want to, a sole proprietorship is just fine for starting out. Of course as you grow you may consider an LLC more, but to start out it technically is not needed, simply recommended.
Hopefully I didn’t loose you after going through the forms of business, it can be a bit confusing and tricky if you have never heard of the different forms of business before. Now we will move onto the next step, your welcome! :)
Step Three: Contact Your Town Hall
It won’t always be the town hall who will help you out, but they will surely be able to refer you to the right department to help with your inquires.
When you get in contact with the right department (should not take long), you need to ask about the local laws. Do you need a license? Or can you simply register a Doing Business As (DBA) name, which is quiet cheap.
I recommend calling for this step to find out about the specific laws relating to your area, as online content regarding local laws won’t always be up to date, and may even be misleading. So… be sure to call your town hall and find out what exactly you need for you to be ‘legal.’
Step Four: Register EIN with the IRS
An Employer Identification Number (EIN) is needed if you are going to hire, or plan on hiring employees to work for you. Although you do not need to get it until you are hiring people, if you want to avoid the stress of doing it later on, I recommend getting it before-hand. You can register online with the IRS, and the process is pretty straightforward.
Note: You cannot register for an EIN until you complete everything else involved in setting up your business (all of the above steps).
Hopefully this has been of some help to your choice in which route to go with the “business legalities.” Be sure to read around CleaningZoom for more tips on starting your cleaning business as well as promotion tactics. I would love to hear which form of business you prefer and why in the comments down below. :)