Today we’re chatting with Arturo Villacorta!
Arthur had a common concern amongst new cleaning entrepreneurs. That concern is… how do you set everything up to make sure everything is kosher and good to go right away?
I’m a big fan of saying that until you get a paying customer, you don’t really have a business. Now, I am going to assume you DO have paying customers, at least one before you even start worrying too much about this stuff.
Below are the 7 things you need to setup your cleaning business correctly. Please, if you have deeper questions revolving around your personal situation, make sure to reach out to a professional that specializes in one of these areas. So many of these things change based off your state, city or even the county you’re operating in so you will want some professional advice to make some of these decisions.
Alright let’s dive into them.
#1 Create a Business Entity
This is super easy to do. Creating an LLC will usually cost you right around $149 plus your local state fees. I prefer LLCs since you don’t need to do any annual reporting and they tend to be simpler to understand. You could also go with an actual corporation based off your needs and wants, but you’ll need to research what is right for you.
It is important to have your own entity though, as that way if anyone does try to sue you, they won’t be able to get access to your personal assets not part of your business. This is good to have as it protects you and also makes other things on this list a lot easier by having one.
#2 Get an EIN
An EIN is basically the social security number of your business.
All you need to do is Google how to setup an EIN and you’ll find the right government site for it. It will ask you a dozen or so questions that will take you about 15-30 minutes to complete and then it will spit out your EIN number right away without any need to wait.
Getting an EIN is a good idea, especially if you plan on doing any kind of corporate commercial work since corporate clients will usually ask you for your EIN.
#3 Create Business Bank Account
It is never a good idea to mix business and personal banking accounts. When you’re small, this will be a bigger temptation. Just don’t do it, set some boundaries between what is business money and what is personal money.
Also by having different bank accounts it will make taxes WAY easier for you so I highly recommend it.
#4 Get Insurance
There are two main types of insurance we’ll be getting. The first is Liability Insurance. For a brand new company this is pretty cheap, costing right around $1,000 per year that you can often pay in monthly installments.
This is the kind of insurance that covers accidents on the job like one of your cleaners breaking a client’s vase or something similar. It is a good idea to have just in case.
The second kind of insurance is Worker’s Compensation. While your cleaners aren’t construction workers and it is unlikely they’ll ever get hurt, it is cheap to have and their job DOES have some mild straining occasionally. Like Liability Insurance, this is usually pretty cheap when your payroll is small.
You can often use the same insurance company to get both of these insurances, but it is worth looking into to see if there is any government programs within your state that offer cheaper alternatives. Sometimes this is a great way to save money depending on the programs.
This will vary based off state to state with what you need. One thing to note is the possible need for a sales tax license if your state, city or county requires you to pay sales tax. Usually this is just $30-50 bucks per year and it’s not a big deal.
One thing you need to realize though is that your cleaning company should always charge the sales tax to the client. The actual tax people don’t care whether you made the client pay the sales tax or you pay the sales tax out of your own pocket, but either way they’re going to come to you and demand you pay the sales tax accrued regardless of whether you knew you had to pay it or not.
They are often worse than the IRS and they can shutdown your business, so it is important to Google this or seek some professional advice on what is right for your situation.
While you could use a software like Quickbooks to do your payroll yourself, just remember you will be liable for any mistake you made.
Usually, I prefer to go through a payroll company. When you’re a smaller company, these payment processing companies are super cheap and they’ll take the responsbility for any mistakes they make in their bookkeeping rather than you.
A huge time saver and stress reliever. Plus, you can focus more on marketing your company versus managing the books so it’s a win-win.