Many people prefer to hire a cleaning service and avoid cleaning themselves. Keeping this pattern in mind, the cleaning service industry is growing at a rapid rate and has a lot of potential in the upcoming years. However, the various aspects of starting a cleaning service can become overwhelming.
Learning what licenses will be needed and how to obtain them is one of the crucial components that might tire you out. Though it may appear difficult at first, obtaining a business license for your cleaning company is an easy venture if you approach it in the right manner.
To begin your road to obtaining the proper business licenses for your cleaning service, consider whether it will be residential or commercial. The process is the same for both, but it will give you a clear idea and direction. Now, without any further wait, let us dive and see what licenses are needed to start a cleaning business. We will go through them in detail, but first, let’s discuss the business entity and structure.
What Is A Business Entity and How to Choose It?
A business entity is a structure your business follows, and it decides the regulations, taxes, insurance, and other things. In order to obtain your licenses and bonds, you choose your business entity and then move toward the next process.
Now, let’s move to the business liabilities and structures you can choose. We will also notify you about the pros and cons of each structure so you can make a better decision for yourself. You can form a sole proprietorship, a partnership, a corporation, or a limited liability corporation (LLC).
A sole proprietorship or partnership will compel you to utilize your own assets to repay any debt owed by the company’s operations; this also applies to partners. This means using a business name without segregating individual and commercial assets. This is a dangerous venture if you are just starting your business for the first time. It might seem a little excessive to you. Let’s move on to the next option we have.
On the other hand, choosing a corporation or limited liability corporation implies that the firm has protection. It enables those with a stake in the corporation to shield themselves from individual culpability. As a result, the person will not be held personally accountable for the repayment of the business loan.
People mostly go for LLCs when starting their cleaning business as it provides them with more freedom and protection to operate a business. You can also contact a lawyer, and they will help you in this regard. They will present you with all the legal responsibilities you need to know, and it will help you in coming up with a better decision.
What are Licenses, Bonds, and Permits?
When you enter the business world, you might see people using these words. These are things you need to start a business. Now, to clear the air of confusion, we are going to briefly discuss them so you can better distinguish them.
A license is permission granted by the government to the business owner. In this permission, it states that they are allowed to operate their businesses in a particular state. Every state has new rules and regulations, so you might have to visit the government office and abide by the things they ask you.
A permit falls on the more inclusive side. It is a permission that states that they are ready to give their services. For example, to operate a food business, you need a permit from the food authorities.
A bond exists as the final option to pay out clients who have been wronged by your company. We will discuss them in detail in the upcoming sections.
Why Do We Need These Permissions?
You might be asking why your company needs licenses, permits, or bonds. The primary explanation is that the government requires them. They are required for the operation of your firm. Business licenses are in place to find the business so that consumers can sue if necessary. It also allows the government to more accurately monitor the business’s financial standing for taxation reasons.
There are severe consequences if you do not obtain the necessary licenses, permits, and bonds. Your business site could be padlocked, and you could suffer significant financial fines and lawsuits. If you lack the proper permits and licenses, your firm will also be without legal backing. It does seem like a scenario you would want to avoid. So, it is better that you follow the traditional and legal methods.
What License Do You Need to Start a Cleaning Business?
When you are starting a cleaning business, you will need two licenses. One is a vendor license, and the other is a DBA license. Let’s have a look at what these licenses are and how they will help you in your business.
A vendor’s license is often equivalent to a basic business license. It enables you to gather sales tax on purchased cleaning goods, which some states require. If you charge clients for cleaning goods in addition to the service, you will almost certainly be obligated to collect sales tax.
A DBA license is needed if your company is known by a name other than its legal name. DBA licenses are required in the majority of states to safeguard customers from illicit company practices. It also prevents other businesses from using your company name.
It is prohibited to operate a cleaning business without an appropriate cleaning business service license. The penalties can be harsh, including fines, license suspension, prison time, and refusal of future licenses. So, to be on the safe side, it is better to go for both licenses.
How to Get a Business License?
In order to get your hands on the license, you will have to contact the state department of affairs. You can tell them about your cleaning business, for example, your carpet cleaning business.
Based on where you reside, you may be routed to your county registrar or city licensing board. When they discover your company, they will explain what you need to do to obtain your cleaning or janitorial license. You may need to first create a business bank account or obtain a surety bond. They will also provide documentation and review the fees with you.
Most vendor licenses must be renewed on a yearly or biannual basis. In every state, DBA licenses are good for a period of five years. Most jurisdictions demand a renewal fee for either license to keep your cleaning business license valid.
What Is a Surety and Insurance Bond?
You can begin seeking clients once you have obtained the necessary license. However, bear in mind that some clients may need you to be bonded and insured. Being bonded merely implies that your cleaning company acquired a bond; being insured implies that you acquired insurance for your company.
A surety bond consists of three parties: the principal, the surety, and the bond party. On the other hand, insurance refers to the agreement between you and the insurance company.
Bonds and insurance, though frequently bundled together, provide various types of protection. In a nutshell, bonds secure your customers, while insurance protects your business. The distinction is particularly noticeable during the claims procedure.
Let’s take a brief look at what bond and insurance claims are.
Your client obtains money from the bond provider through a bond claim. A cleaning bond, for instance, compensates your clients if they assert that one of your personnel steals from them. Your company is then compelled to refund the surety in whole.
When you present an insurance claim, the insurer covers the business for the amount you lost. You receive a cheque for a single payment and use it for repairs, lawyer expenses, etc. As there is no need to pay back the insurance provider, business insurance charges more than a bond.
Bonds You Need for Your Cleaning Business
Here, we will take a glance at the cleaning business bonds you need.
License And Permit
Your business will require a license and permit bond solely if it’s needed by your municipality. This bond guarantees that your cleaning company will follow all state and local legislation. It also shields government organizations from litigation brought by clients who are dissatisfied with the services of your cleaning firm.
Although surety bonds are not needed by law, they are often needed in client agreements. This bond covers customers if one of your staff stole from them or if the client believes you did not perform cleaning services as agreed. It does not, however, cover simple accidental harm to the customer’s home or personal goods.
Insurance for Cleaning Business
Bonds protect your cleaning company from legal action. However, you must have insurance to protect your firm from mishaps. You need the following insurance for your business.
General liability insurance shields your cleaning business from lawsuits stemming from client accidents and property harm. Cleaning companies may choose to add testimonials to this policy. For example, if you lose a key, the insurance will give you the money to make a new key or cover the cost of materials. General liability insurance is necessary and needed for all types of businesses.
Worker Compensation Insurance
Most states will ask you to have workers’ compensation insurance right away as you recruit the first staff member. Workers’ compensation pays for medical expenditures and compensates injured workers for missed wages. It shields business owners from legal action if an employee is injured on the job. So, it is a win-win situation for both sides.
Commercial Auto Insurance
Commercial auto insurance is typically needed by state legislation for cleaning companies that operate their own vehicles. If commercial vehicles get damaged in an accident, commercial auto insurance pays legal fees, hospital bills, and damage to property. It may also include theft and sabotage.
In order to operate a business, you need to get your hands on licenses and bonds for a smooth ride; otherwise, it can cause issues. We have discussed in detail what licenses are needed to start a cleaning business. It is better to visit your state office and see what they want from you. The process is simple and necessary if you have any confusion, feel free to ask us.
Frequently Asked Questions (FAQs)
Q: Are there any other permits and licenses you need?
A: It depends on the state and the location. There are some states that don’t require any additional licenses, but it is better to keep a check on the latest policy. Visit the state office and confirm once again so that your business doesn’t have to bear any loss.
Q: How to start your own cleaning business?
A: The steps are simple if you have a plan. First, you need to register your business and entity. Then, you should go for licenses and, in the end, buy cleaning equipment to kickstart your business. Make sure you invest in marketing.
Q: Can you face any trouble in case of no license?A: Yes, it is a legal requirement to obtain the licenses and bonds. Your business cannot operate without it. So bear in mind and don’t take any illegal path. It can lead to jail time or heavy fines.