Do I Need an LLC for My Handyman Business?

If you are ready to embark on the entrepreneurial journey of setting up a handyman business, the first step is to create a limited liability company (LLC). Establishing an LLC is a straightforward process that can be completed in just five steps. With this guide, you will learn how to set up an LLC for your handyman business and gain the legal protection needed to start your venture.

Written by:

Newfoundr

Updated on:

August 2, 2023

7 Steps to Setting up an LLC for your Handyman Business:)

1. Pick a Name For Your Handyman LLC.

When naming your Airbnb LLC, it is important to consider the potential impact it could have on your business. Your name should be catchy and memorable, while still accurately representing the services that you provide, whether that’s rental properties or travel experiences. Consider the following tips when making a decision:

Research the competition - Look at the names of other Airbnb businesses to get an idea of what is already out there. Are there any words or phrases that you find especially appealing?
Be unique - Aim for a name that isn’t already in use, either online or in real life. A good rule of thumb is to make sure there aren’t any other companies with the same name.
Think of a memorable phrase - If you’re having trouble coming up with something new and fresh, look for different adjectives and nouns to get your creative juices flowing.
Stay relevant - Your name should be rooted in the concept of travel and hospitality, which can easily be accomplished by including keywords such as “lodging”, “vacation” or “rooms''.

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2. Choose a Registered Agent For Your Handyman LLC.

If you’ve decided to form a handyman LLC in your state, one of the first steps in the process is to pick out a Registered Agent. A Registered Agent acts on behalf of your business and is responsible for receiving legal documents in your LLC’s name. Knowing what to look for when choosing one can be tricky, especially when you don’t know where to start. Here are some tips that should help you select the right one for your business:

Ensure that they are authorized to act as a Registered Agent in your state.
Compare their services vs cost to find the best value.
Check customer reviews and feedback ratings.
Look for a Registered Agent who is knowledgeable and experienced in the handyman industry.
Make sure they offer convenient communication channels like phone, email and live chat.
Ask around for referrals from other handymen or LLC owners.

3. File Your Handyman LLC Certificate of Organization.

The process of filing your certificate of organization for your handyman business can seem overwhelming at first. Setting up a business can be a time-consuming process with many steps, but taking the time to do it correctly is essential for the longevity and financial success of your business. At a minimum, you will need to:

Create a business plan
Identify your legal structure (e.g., sole proprietorship, LLC, etc.)
Choose an official name for your handyman business
Register the name with the state where you will be doing business
Complete and file the appropriate forms with your state or local government
Obtain any necessary licenses or permits related to handyman services in your area, such as contractor’s licenses
Open a separate bank account to use only for business transactions
Apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS)

4. Draft Your Handyman LLC Operating Agreement.

Creating an operating agreement for a handyman business is an essential step in establishing a successful business. An operating agreement outlines the responsibilities, rights and rules of each party involved in the business, and can help ensure that there is clarity between all parties. To ensure your operating agreement covers all the necessary aspects of your handyman business, here are some key points to consider:

Business structure – what type of entity will be used for the business: sole proprietorship, partnership or limited liability company?
Names and roles of all owners
Method of contribution by owners
Distribution of profits and losses
Decision-making process
Exit strategy
Insurance requirements

5. Grab Your Handyman LLC EIN.

As a handyman business, obtaining an Employer Identification Number (EIN) is a crucial step in the process of setting up your business. An EIN serves as a unique identifier for business entities and is used when filing taxes, opening a business bank account, and obtaining certain state licenses. You can easily obtain an EIN from the IRS website or by calling the IRS at 1-800-829-4933. Below is a brief summary of how to obtain your EIN:

Visit the IRS website and select "Apply for an Employer Identification Number (EIN) Online" or call the IRS at 1-800-829-4933.
Answer all relevant questions about your business including address, type of organization, reason for applying, etc.
Provide basic information about yourself such as name, Social Security number (SSN), address, etc.
Receive your EIN immediately after you apply online. If you apply by phone or fax, you will receive it in 4 weeks.
Keep your EIN information confidential and secure.

Frequently Asked Questions:

Is it Legally Required to have an LLC for Your handyman Business?

Whether or not you are legally required to have an LLC for your handyman business depends on where you plan to operate. In some states, forming an LLC is the best option for protecting your personal assets from liability issues that may arise with handyman services. The other option is to form a corporation. If you decide to go with an LLC, you are required by law to register in the state in which you will be doing business. This includes filing a Certificate of Formation and creating an Operating Agreement that outlines the management of the company and its members. Additionally, the company must keep records of its activities and file yearly reports with state agencies. Other advantages of an LLC include limited liability protection, pass-through taxation, and simplified paperwork for filing taxes. With an LLC, you can also name several members or hire employees who can help with your handyman business operations. Furthermore, if you operate in multiple states, you may need to register as a foreign entity in each one so that your business is legally compliant throughout the country. Overall, forming an LLC can be a beneficial step in helping protect and grow your handyman business. It may be legally required depending on your state regulations but could also provide many advantages such as limited liability protection and tax savings that could benefit your company’s success.

What are the Tax Benefits for Having an LLC for Your handyman Business?

Having an LLC for your handyman business offers a variety of tax benefits that can help you maximize profits and reduce the amount of taxes you owe. Essentially, as an LLC, you are only taxed once as opposed to double taxation associated with corporations.

Pass-Through Income: LLCs are treated as pass-through entities, meaning they don’t pay their own income taxes but instead all profits and losses are passed directly to their owners. As a handyman, this means the income earned is only taxed at the owner’s individual tax rate.
Flexible Tax Treatment: Although an LLC defaults to being treated as a pass-through entity, it also has the flexibility to choose corporate taxation if it makes sense for its business goals. This is beneficial as an LLC owner can get the best of both worlds depending on the situation.
Other Tax Advantages: Other tax advantages for LLCs include deductions for certain business expenses like medical insurance premiums or travel and home office expenses that are incurred during the course of running a handyman business.
Simple Reporting: An additional benefit of having an LLC is that there is a simplified filing requirement with most states only requiring annual filing which makes compliance much easier than corporations.

What Does it Cost to Form an LLC For Your handyman Business?

What Liability Risks do handyman Businesses Face?

Handyman businesses face a variety of liability risks including property damage, bodily injury and worker’s compensation claims, among others. Handymen are exposed to the risk of being responsible for any damages or injuries caused by their negligence or failure to properly install, repair or maintain an item or service. Additionally, handyman businesses are exposed to the risk that a customer may sue them for breach of contract if they fail to live up to the standards agreed upon in the service agreement. Handyman businesses must ensure they have adequate insurance coverage in place in order to protect themselves from any potential liability claims.

Additional Resources for Starting an HandymanBusiness:

Starting a handyman business is an exciting way to become your own boss and offer your services to help people in your community. To get the ball rolling, here are some helpful resources to get you started:

Small Business Administration (SBA): The SBA provides a plethora of resources for small businesses, including resources related to the handyman industry. They offer information on topics such as useful business tools, financing and accessing financing, marketing and legal advice.
Self-Employment Tax Center: This resource offers helpful information on self-employment taxes. It provides insights on how to manage taxes as a self-employed handyman, such as filing requirements and payment options.
State Contractor Licensing Board: Depending on state regulations, handymen may need to be licensed before they can provide services. Check your local government website for licensing requirements in your area.
Other Professional Resources: Professional organizations like National Association of Home Builders and National Association of the Remodeling Industry provide useful information for handymen who want to stay up-to-date in the industry.
Small Business Associations: Small business associations are another great resource for networking with other business owners and sharing tips and knowledge about running a successful home repair business.