Should I Start an LLC for My Post-Construction Cleaning Business?
Starting a limited liability company (LLC) for your post-construction 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 post-construction cleaning business, lawsuits can arise from things like negligently claiming that a site is safe post-cleaning, especially if this leads to a client suffering personal injuries.
LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your post-construction cleaning business seem more credible.
Recommended: Use Northwest to form an LLC for $29 (plus state fees).
Do I Need an LLC for a Post-Construction 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 Post-Construction Cleaning Business
By starting an LLC for your post-construction cleaningbusiness, 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.
Post-construction cleaning businesses will benefit from liability protection because of the risks associated with visiting and working on client property, as well as other general business risks.
Example 1: One of your employees falls off a ladder during a job and seriously injures themselves. They sue you, claiming that you did not provide workers with the proper equipment. Limited liability from being an LLC protects your personal assets as the owner, so only the business’s assets could be used for the settlement.
Example 2: A passerby trips on some debris outside the worksite and breaks an arm. They demand that your business pays for their medical bills. Since your business is an LLC, limited liability ensures your personal assets are protected.
Example 3: A competitor claims that your current advertisements fall under libel, taking away from their business, and are considering taking you to court. Should your business be found in the wrong, settlements could be paid with business assets but not your personal assets since limited liability protects them.
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 Post-Construction 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 post-construction 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
Post-construction 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).
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
- Alabama LLC
- Alaska LLC
- Arizona LLC
- Arkansas LLC
- California LLC
- Colorado LLC
- Connecticut LLC
- Delaware LLC
- Florida LLC
- Georgia LLC
- Hawaii LLC
- Idaho LLC
- Illinois LLC
- Indiana LLC
- Iowa LLC
- Kansas LLC
- Kentucky LLC
- Louisiana LLC
- Maine LLC
- Maryland LLC
- Massachusetts LLC
- Michigan LLC
- Minnesota LLC
- Mississippi LLC
- Missouri LLC
- Montana LLC
- Nebraska LLC
- Nevada LLC
- New Hampshire LLC
- New Jersey LLC
- New Mexico LLC
- New York LLC
- North Carolina LLC
- North Dakota LLC
- Ohio LLC
- Oklahoma LLC
- Oregon LLC
- Pennsylvania LLC
- Rhode Island LLC
- South Carolina LLC
- South Dakota LLC
- Tennessee LLC
- Texas LLC
- Utah LLC
- Vermont LLC
- Virginia LLC
- Washington LLC
- Washington D.C. LLC
- West Virginia LLC
- Wisconsin LLC
- Wyoming LLC
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 types of businesses need insurance to protect their business assets because limited liability only protects the owner’s personal assets. Post-construction cleaning businesses need insurance because of the liability involved in the work. Dealing with dangerous equipment and possibly hazardous debris can cause injury or property damage, and insurance can help with the cost of both these and other problems.
Common Situations Business Insurance May Cover for a Post-Construction Cleaning Business
Example 1: As your employees unload equipment from a truck, they accidentally cut a hole in the side of your client’s luxury sedan. General liability insurance would pay for the client’s vehicle repair costs.
Example 2: While rounding a corner at a job site, one of your employees accidentally runs directly into a client and knocks him to the ground. The client suffers a concussion and a broken arm, and he decides to sue you for damages. General liability insurance would cover your legal defense costs and any required settlement.
Example 3: A competitor files a lawsuit against your company, claiming you slandered and libeled his business. While you disagree with both accusations, you know you need to hire a lawyer immediately. General liability insurance would pay for your legal defense and any required settlement.
Other Types of Coverage Post-Construction 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 post-construction cleaning businesses should obtain.
Workers’ Compensation Insurance
Most states require businesses to carry workers’ compensation insurance for their 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 workplace accident.
Commercial Property Insurance
You made a major investment in the cleaning equipment, supplies, and real estate needed to run your company. 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 stored there.
Commercial Auto Insurance
Any vehicle you use primarily for your construction cleanup work 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 equipment you carry in your vehicle.
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, workers’ compensation insurance, and commercial auto insurance.
Read our Business Insurance for Post-Construction Cleaning Businesses article for more info.
Startup costs are relatively low — usually around $2,000. The materials needed include:
- Chemical cleaners
- Mops and brooms
- Shop vac
- Ladders
- Window cleaning materials
- Wheelbarrows
Cleaning materials, per job, can amount to less than $100. These expenses account for used cleaners, equipment depreciation, and worker time. On average, a cleaning crew operator is paid between $20–$30 for their time.
Visit our How to Start a Post-Construction Cleaning Business guide to learn more about the costs of starting and maintaining this business.
Ongoing costs for post-construction cleaning businesses will include replacing cleaning material costs, employee wages, and insurance costs.
Learn more about running a post-construction cleaning business.
Businesses are typically paid for each project that they complete. While money is typically made by cleaning up after the construction has taken place, some businesses may also make money by charging to prepare site locations for construction.
Learn more about starting a post-construction cleaning business.
Post-construction cleaning businesses help to aid in the processes of transitioning, cleaning, and sanitizing an environment that has been worked on so that it is ready for use for the final purpose that the project was originally started for.
The average yearly profit for a post-construction cleaning business is $100,000.
Learn more about starting a post-construction cleaning business.
