Should I Start an LLC for My Carpet and Upholstery Cleaning Business?

Starting a limited liability company (LLC) for your carpet and upholstery 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 carpet and upholstery cleaning business, lawsuits can arise from things like accidentally damaging a client’s expensive carpet while cleaning it or from accruing significant debt that cannot be paid back.

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

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

Do I Need an LLC for a Carpet and Upholstery 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 Carpet and Upholstery Cleaning Business

By starting an LLC for your carpet and upholstery 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.

Carpet and upholstery cleaning businesses will benefit from liability protection because of the risk of liability from property damage, workplace accidents, and general operational risks.

Example 1: Negligence by an employee causes toxic cleaning chemicals to spill from a storage container. It contaminates the client’s property. If the client insists on compensation for the pollution, limited liability will protect the business owner from personal liability.

Example 2: Your carpet cleaning business rents cleaning equipment to do a job. The equipment gets damaged during the work, and you are unwilling to pay because you suspect it was already faulty. The equipment owner later decides to sue for damages. Your business may be held responsible, but as the business owner, your assets will stay protected by your LLC status.

Example 3: While cleaning, a member of your janitorial staff slips and sprains a knee. You offer to pay the medical bill, but the staff member initiates a lawsuit. Your business may get sued and be made to compensate, but your personal assets as the business owner will be safe.

Example 4: Your carpet shampooer malfunctions, causing water damage to a client’s living room. They ask you to cover the resulting repair costs.

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 Carpet and Upholstery 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 carpet and upholstery 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

Carpet and upholstery 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?

Yes, all businesses need insurance because limited liability covers only the owner's assets and not the business's assets. When your LCC is insured, both you and your business are covered. Carpet cleaning businesses need business insurance to protect their assets against theft, damages, etc.

Common Situations Business Insurance May Cover for a Carpet Cleaning Business

Example 1: Your carpet shampooer malfunctions, shooting water and cleaning fluid all over the home recording studio of a client. His equipment is ruined. Your general liability insurance would likely help pay for replacing his recording equipment.

Example 2: One of your employees is rushing to finish a cleaning job when he runs into the client, knocking her backward and causing her to hit her head on the corner of a table. She requires medical care for her injuries and asks that you pay for that medical care. Your general liability insurance would likely pay for her treatment.

Example 3: A recent client calls and accuses one of your employees of ruining several of the expensive Persian rugs in her collection. She files a lawsuit against your business for damages. A general liability insurance policy would cover the cost of your legal defense and a settlement if one is required.

Other Types of Coverage Carpet Cleaning Businesses 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 carpet cleaning businesses should obtain.

Professional Liability Insurance

Professional liability insurance is designed specifically for your business needs. As a professional carpet cleaner, there is a possibility that a client could claim you made mistakes that caused injury, financial or otherwise. If he or she were to file a lawsuit against your business, your professional liability insurance would cover the cost of your legal defense.

Commercial Auto Insurance

Your carpet cleaning vehicles should be covered by commercial auto insurance. With a commercial auto policy, you and your employees are protected while driving. If you or an employee causes an accident, the policy will pay for damages to vehicles and medical care for the injured.

Workers’ Compensation Insurance

If you have employees, chances are your state requires you to carry workers’ compensation insurance. If an employee is injured performing job-related duties, the workers’ comp policy you have will pay for his or her medical treatment. It will also pay for some of the wages the employee loses while recovering.

Commercial Property Insurance

All of the equipment and supplies you have invested in would be costly to replace if they were lost in an event like a fire. But with commercial property insurance, you can get help from your insurer to pay for repairs or replacements. As long as the damage was caused by a covered event, you should be able to get financial assistance after you file a claim.

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 and workers' compensation insurance if you have employees.

Read our Business Insurance article for more info.

To start a carpet cleaning business, you will need to buy cleaning equipment and supplies, which can cost up to $30,000. You will also need a van for transporting equipment. A used van can cost as low as $5,000. Other requirements include obtaining all necessary licenses and a website.

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

The major ongoing expenses of running a carpet and upholstery cleaning business are cleaning supplies and equipment, transportation, and payroll.

Learn more about running a carpet and upholstery cleaning business.

Carpet and upholstery cleaning businesses make money by charging for their cleaning service. They can charge by the hour, or by square footage.

Learn more about starting a carpet and upholstery cleaning business.

Carpet and upholstery cleaning businesses offer a wide range of services for residential and commercial clients, including cleaning, dyeing, and restoration.

A carpet and upholstery cleaning business can charge between $75 to $150 per hour on a cleaning job and, with little overhead, the profit margin can be high.

Learn more about starting a carpet and upholstery cleaning business.