If you’ve ever thought about starting your own cleaning business, you have come to the right place! At Insurance Canopy, we not only provide affordable cleaning business insurance, but we also provide business advice so you can run a successful business. Today we’ll be covering how to register a cleaning business—from state and federal requirements, to business structures, and more.
Purpose of Registration
You may be wondering if registering your business is actually necessary. As a matter of fact, if you plan on running an official business, you will need to register your business two times—a state registration and a federal registration. These registrations keep your business compliant with federal and state laws, and can help protect your business’ brand identity.
Now let’s get into what each registration entails.
The first step with your federal registration is to apply for an Employer Identification Number, also known as EIN, which can be done online. Your EIN allows you to do several important things for your business, like opening a bank account, paying employees, paying state and federal taxes, and more. Keep in mind that if you have already applied for an EIN online previously, you will have to apply for an EIN through a different method.
Your state registration may vary depending on where your business will be located and operated, so you may need to check other local guidelines. As a general rule of thumb, however, you’ll need to register either with your local Business Bureau, Business Agency, or Secretary of State’s office. You can find your state’s local office at this link here. Simply look up your state and the Small Business Administration (SBA) will direct you to where you need to go.
In order to complete your state registration, you will need to provide the following information:
- Business Name
- Business Location/Mailing Address
- Ownership, Management, or Directors Structure
- Register Agent Information
- (For Corporations) Number and Value of Share
Once you have registered your cleaning business, you’ll have to decide your business structure. This will affect how you will set up your business, how much you’ll pay in taxes, how your business will operate, etc. We’ll walk you through the four most common types of business structures.
A sole proprietorship means you are working independently, meaning you won’t be hiring employees, and you will have complete control of your business. If you’re just getting started with your cleaning business and you don’t have a partner, this will likely be the most common business structure.
If you want to start your own business with as little risk as possible, a sole proprietorship is the smartest business structure for you to start with. However, remember that your business assets and liabilities are not separated from your personal assets, so they can be at risk for repayment of a claim. No documents are required for a sole proprietorship.
If you’re looking to start your business with a partner, this is likely the business structure for you. A partnership is one of the more simple structures for two or more people who want to own a business together. There are two different types of partnerships—Limited Partnership (LP) and Limited Liability Partnership (LLP). The main difference between the two is the amount of risk and liability.
In an LP, one partner has “unlimited liability” and the other partner(s) has limited liability, which also means they have limited control over the company. The partner with the unlimited liability will need to pay profits through personal tax returns, and the limited liability partner must pay off self-employment taxes.
In an LLP, all partners are given limited liability coverage, which protects each partner from debts against the partnership. This also means that one partner will not be responsible for the actions of another partner.
The documents you’ll need for this are Certificate of Limited Partnership and Limited Partnership Agreement OR Certificate of Limited Liability Partnership and Limited Liability Partnership Agreement.
Limited Liability Company
A Limited Liability Company (LLC) may be the most popular choice for starting a small business. Unlike a partnership or sole proprietorship, an LLC provides you protection from your personal assets. This means that your personal assets, like your home, savings account, vehicle, etc. will not be at risk in the event that your business faces a lawsuit.
You should note that members of an LLC are considered self-employed and must pay taxes towards Medicare and Social Security. Each state varies on its rules and regulations for an LLC, so be sure to check with your local offices. For an LLC, you will need an Articles of Organization and Operating Agreement.
The last business structure we will discuss today is a corporation. What separates a corporation apart from the rest of the business structures is that it is a legal entity that stands separate from its owners. People choose a corporation because it provides the strongest legal protection to its owners from personal liability because it can make a profit, be held legally accountable on its own, and can be taxed.
Although a corporation has the most protection, it also comes at a cost. A corporation is the most expensive form of business and requires more operational procedures, records, and reporting to maintain a legal corporation. If you choose a corporation for your cleaning business, you’ll also be required to pay income taxes on your profits. To become a corporation, you will need one of the following documents: Articles of Incorporation or Bylaws or Resolutions.
Because there are several different types of corporations, continue to do your research if this is the business structure you are most interested in for your cleaning business.
Choosing a business name is essential so you can register your business. When selecting a business name, you’ll want to make sure it is unique and memorable, and also relevant to the services you will be providing. For example, if you plan on starting a carpet cleaning business, consider including “carpet cleaning” in your business name.
You can be creative when coming up with your business name, but keep in mind many of your choices may already be taken by another company. You’ll also want to keep in mind that if you plan on creating a website, you’ll want to check domain name availability as well.
The Small Business Administration (SBA) shares four different ways you can register your business, and each serves a different purpose. Take a look at the list below:
- Entity Name: protects you at a state level
- Trademark: protects you at a federal level
- Domain Name: protects your business website address
- DBA: doesn’t give legal protection, but may be legally required
Registering your business name will cost a small fee and will depend on where you live, but shouldn’t cost more than $100.
Cleaning Business Liability Insurance
Now that you know everything about registering your cleaning business, you’ll want to consider one more essential business component—liability insurance. Without insurance, you may have to pay hefty expenses out of your own pocket because believe it or not, you face risks every day while on the job.
A professional carpet cleaner may accidentally stain a customer’s carpet and have to pay to replace it. Perhaps a customer trips on your window cleaning equipment and breaks their ankle. Someone may steal or damage your expensive cleaning equipment. These are just a couple of examples of the various risks associated with professional cleaning, which is exactly why you’ll want insurance.
Insurance Canopy has cleaning business insurance available for just $26.67 per month and you get both general liability and professional liability. Your policy is active for one year and you can set it up to automatically renew so you never go with a gap in coverage. Purchase a policy today so you can do what you love with peace of mind. If you have any questions regarding our cleaning business insurance, don’t hesitate to reach out to our licensed insurance agents.
You’re ready to take the first step and register your cleaning business! We hope this guide on how to register a cleaning business was helpful in understanding the necessary steps. We wish you the best of luck with your cleaning business!