Do You Need a House Cleaning Service License?

The short answer to this question is YES; you do indeed need a business license, although there aren't specific house cleaning business licenses. Obviously, if you are simply cleaning your aunt's house and she is paying you each time, you don't need a business license. However, if you intend to operate an actual business (whether or not you end up with employees), you do need to register your company and become licensed. Your license is a small business license, and there are several reasons to get it:

• A business license means that you have formally registered with your state.
• It is easier to attract clients when you are licensed, bonded, and insured. Potential customers want to be able to trust your business, and they certainly won't do that if you aren't licensed.
• You could be fined, or even jailed in some places if you operate without a license. This is because the government is going to want to tax you, so not having a license seems as if you are trying to avoid paying what you owe.

What type of Business License do you need?

What type of license do you need?

Each state and even county has its own rules, so there is no single accurate answer. Another complication is the fact that these rules are always changing, so you can't rely on outdated information. Contact your local city or county government, your state's department of revenue, or department of taxation. (It's very possible that these state entities will refer you back to your county clerk or city licensing board, but it's best to start at the state level and go from there.)

• At the very least, you will need a vendor's license in all states. You apply for this through your county administration office or local city hall. In most cases, this license will cost less than $50. You need to pay sales taxes on non-wholesale revenue that you earn in your state, and the vendor's license makes this possible.
  
  
• If you have any employees, you will also need an EIN, or Employer Identification Number. This is a Federal Tax Identification number for your business, and you can use form SS-4 to apply for it.

The business license itself takes a little more thought. First of all, you need to decide how you are structuring your company.

Sole Proprietorship:

If you are beginning without any additional employees, you may choose sole proprietorship. In this case, you will (unless your company is named after you) apply for a DBA license.

• DBA stands for “Doing Business As.” In essence, you are doing business as whatever fictitious name you have chosen for your company. DBAs are valid for 5 years in every state.
  
  
• If you are operating as a sole proprietor, you are personally responsible for your company's debts, losses, and liabilities because you and the business are one and the same.
  
  
• Sole proprietorship is simple to set up; the money you earn is your income, so taxes are easy to prepare. You will use your tax identification number to file taxes.
  
  
• On the other hand, because there is no separation between you and the business, you are taking a risk.
  
  

Partnership:

This is like a sole proprietorship except for the fact that it involves two or more people being personally financially liable.

Corporation:

You can operate as a corporation, a legal entity in itself that is created to conduct business. Corporations can be taxed, but the advantage lies in the fact that the owner is not held personally liable the way that he or she would be in a sole proprietorship or partnership. It is more expensive to file as a corporation than as a DBA.

LLC:

Many small business owners prefer to structure themselves as LLCs. An LLC is a Limited Liability Company. As you can imagine, one advantage is the fact that the owner has limited liability because business assets are separated from personal assets. You may have one or many members of an LLC,  (a “member” is the official term for “owner” in this case). 

S Corporation:

If you are structured as an LLC, you can choose to classify yourself for tax purposes as an S Corporation. This means that your company meets specific requirements set by the Internal Revenue Service. It offers limited liability protection and allows your shareholders to be taxed as a partnership. This is not the option for you to consider if you are starting small, but as your company grows, consult a business attorney or tax attorney to see if you can save taxes by classifying your business as an S Corporation.

C Corporation:

The classification of C corporation is a large company with shareholders. If there are dividends, they are double-taxed because the company pays taxes on its profits before dividends are distributed to shareholders and then the shareholders also pay taxes on those profits, which are classed as income. 

Sales tax:

Although it isn't a license per se, you may need a Sales Tax ID number. This comes from the state, and you will need to find out about sales tax regulations where you live. You may even need to charge local sales tax on your services.

• For example, Maine has a 5% sales tax, but no local or city taxes. The state doesn't tax personal services, such as house cleaning, but if you sell any cleaning products, you would collect sales tax.
• California's sales tax rate is 25%, but in Los Angeles, the rate is 9.5%. California also doesn't tax residential cleaning services.
• Hawaii, New Mexico, South Dakota, and West Virginia generally do charge sales tax on services.
• Texas doesn't charge sales tax for most services but does charge for residential cleaning services.

States vote on sales taxes frequently, so do your research and make sure that your information on the requirements for your state, county, or city is current.

Laws, requirements, renewal dates, and prices change frequently, so you may wish to consult an attorney as you make difficult decisions concerning tax practices. At My House Cleaning Biz, we are committed to partnering with you as you manage or grow your residential cleaning business. Our database of resources is a “goldmine” to small business owners like yourself. Whether you are in the early stages of building your business or a well-established owner, our website offers a wealth of in-depth information, resources, and training that you won't find anywhere else on the Internet. Join Today.