Should I Start an LLC for My Commercial Cleaning Business?

Starting a limited liability company (LLC) for your commercial cleaning business can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For a commercial cleaning business, lawsuits can arise from things like customers being unsatisfied with your cleaning services, as well as from your employees accidentally damaging a customer’s belongings while carrying out a cleaning job.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your commercial cleaning business seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

Do I Need an LLC for a Commercial Cleaning Business?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for a Commercial Cleaning Business

By starting an LLC for your commercial cleaning business, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Commercial cleaning businesses will benefit from liability protection because of the risk of trademark infringement, property damage, and workplace accidents.

Example 1: One of your employees uses a harsh cleaning chemical on a client’s expensive carpet, leaving stains and ruining it. The client demands that you pay for the damages. Since your business is an LLC, as the owner, your assets are protected with limited liability, so only the business’s assets can be used to pay.

Example 2: While carrying some equipment, an employee drops it on the customer. This results in the customer going to the hospital and asking you to pay for the medical bills. Your personal assets as the owner are protected from being used to pay since limited liability covers them as an LLC.

Example 3: On the way to a job, an employee gets into a car accident with another motorist, and they want to sue your business. If your business is an LLC, limited liability would protect your assets as the owner. This means that only business assets would be used to pay for the settlement.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for a Commercial Cleaning Business

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if a commercial cleaning business owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

Credibility and Consumer Trust

Commercial cleaning businesses rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a trusted LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Do LLCs Need Insurance?

All businesses need insurance because the limited liability from being an LLC only covers the assets of the owner, not the assets of the business itself. Commercial cleaning businesses need insurance because of the risks involved in working on other people’s property. If any damage should occur to their homes or belongings, insurance can help with the costs and let them get back to work sooner.

Common Situations Business Insurance May Cover for a Commercial Cleaning Business

Example 1: While visiting your building for a consultation, a customer slips on a wet floor tile in the restroom, breaks a wrist, and decides to sue your company. General liability insurance would pay for your legal defense and any required settlement.

Example 2: A local competitor accuses you of libeling her business in your latest marketing campaign. While you disagree with the claim, you want to hire an attorney immediately. General liability insurance would cover your legal fees and any required settlement.

Example 3: One of your competitors believes your new logo is too similar to his company’s logo and threatens to sue. General liability insurance would pay for your legal defense and any required settlement.

Other Types of Coverage Commercial Cleaning Business Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all commercial cleaning businesses should obtain.

Workers’ Compensation Insurance

If you have any employees, most states will require you to carry workers’ compensation insurance for both part-time and full-time workers. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover but also any disability or death benefits stemming from a work-related accident.

Commercial Auto Insurance

Any vehicle you use primarily for business requires commercial auto insurance to protect the vehicle, driver, and others on the road in the event of an accident. Be sure to select a policy that covers not only accident-related vehicle repair costs and medical treatment for anyone injured but also sufficient protection for any business materials you carry in your vehicle.

Commercial Property Insurance

You made a major investment in your equipment, cleaning supplies, company vehicles, and real estate. In the event of a fire, theft, or natural disaster, commercial property insurance would cover the cost of repairing or replacing your business-related property. This includes structural damage to your building as well as the business materials you store there.

Commercial Umbrella Insurance

While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance, commercial property insurance, workers’ compensation insurance, and commercial auto insurance.

Read our Commercial Cleaning Business Insurance article for more info.

The costs to start a cleaning business are minimal, possibly less than $500. A larger company may budget up to $100,000 and start with professional cleaning equipment. Ongoing expenses for a cleaning company include cleaning supplies, utilities, insurance, and maintenance.

Visit our How to Start a Commercial Cleaning Business guide to learn more about the costs of starting and maintaining this business.

Some of the operating expenses for commercial cleaning businesses include payroll, utilities, insurance, and cleaning supplies.

Learn more about running a commercial cleaning business.

A commercial cleaning business makes money by charging either an hourly or flat rate for cleaning services.

Learn more about starting a commercial cleaning business.

Restaurants and other businesses often pay for a commercial cleaning service rather than keep a full-time cleaning staff. This creates plenty of opportunities for a commercial cleaning business.

A typical commercial cleaning business charges between $50 and $150 an hour. Such companies can start small, or they can hire several crews with a lot of equipment. This gives flexibility depending on the company’s budget for startup expenses.

Learn more about starting a commercial cleaning business.