Last Updated: May 10, 2024, 10:45 am by TRUiC Team

Should I Start an LLC for My Handyman Business?

Starting a limited liability company (LLC) for your handyman 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 handyman business, lawsuits can arise from things like a contracted handyman accidentally harming a client’s belongings (or property) while performing repairs or other maintenance-related services. 

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

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

A man with a toolbelt holding gloves and a hard hat

Do I Need an LLC for a Handyman Business?

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

You should start 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 Handyman Business

By starting an LLC for your handyman 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.

Handyman businesses will benefit from liability protection because of the risk of lawsuits related to property damage and physical injuries. 

Example 1: A customer hires a handyman to install a new light fixture in their house. The handyman accidentally drops the fixture, which breaks, causing a small fire in the bathroom. Following this, the customer sues the business for the damages. With limited liability protection, the damages from the lawsuit will only affect the business's assets and not the owner's personal assets.

Example 2: One of your employees is fixing a leaky faucet in a customer’s bathroom. The handyman replaces the faucet but accidentally damages the sink in the process. Following this, the customer sues the handyman business. If found liable, limited liability protection will ensure that the owner’s personal assets are protected from any compensation associated with the lawsuit.

Example 3: A customer hires your business to repair a hole in their roof. The handyman patches the hole, but it opens after a thunderstorm, causing water damage. Following this, the customer sues the business. In this scenario, limited liability protection will ensure that the damages from the lawsuit will only be covered by the business’s assets and not the owner’s personal assets.

Example 4: During a job, you leave a ladder out while going to your truck for supplies. The client’s child climbs the ladder and falls off, sustaining serious injuries. The client sues your business for the resulting medical expenses.

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 Handyman 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 handyman 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

Handyman 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 loansgrants, 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 dependable 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 to protect their business assets — even LLCs. This is because the limited liability protection from an LLC protects your personal assets, not your business assets.

Handyman businesses need insurance to protect themselves from potential liabilities and financial losses. It is important for them to have coverage for any damage that may arise from their services, whether intentional or unintentional. Insurance can also help them cover the costs of legal fees in case there are disputes about the quality of their work.

Common Situations Business Insurance May Cover for a Handyman Business

Example 1: An employee drops a window while working in a customer’s home, shattering the window and damaging their new wood floors. General liability insurance would cover the cost of replacing the window and floors.

Example 2: While meeting about an upcoming project, your client trips over a can of paint and breaks an arm. If you’re found liable, general liability insurance would cover her medical bills.

Example 3: Someone overhears you and your colleague talking negatively about a client and informs that client, who sues you for slander. General liability insurance would cover your legal expenses and any resulting payout to the client.

Other Types of Coverage Handyman 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 handyman businesses should obtain:

Home-Based Business Insurance

Since an office is unnecessary for this type of business, you may choose to operate out of your home. If your home suffers a loss or a client has an accident during a meeting there, you may find you’re underinsured or uninsured through your existing homeowner's insurance policy. Home-based business insurance fills in those gaps, protecting against losses a standard homeowner’s policy excludes.

Workers’ Compensation Insurance

If you have employees, you likely need this coverage because most states require businesses to carry workers’ compensation insurance for their part-time and full-time staff. 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.

While many states allow business owners to exclude themselves, consider including yourself in your policy if you’re directly involved in day-to-day business operations.

Commercial Auto Insurance

If you have an accident while traveling to and from client sites, your personal auto policy may exclude that loss. A separate commercial auto policy helps fill that coverage gap, and each state mandates the minimum levels of auto coverage for all vehicles that operate on public roadways. Most often, those minimums only offer basic protection, leaving you underinsured in the event of a loss so consider purchasing limits greater than those required by state law.

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 commercial auto insurance.

Read our Handyman Business Insurance article for more info.

Opening a handyman business is a relatively inexpensive endeavor, as startup costs can be achieved with less than $1,000. The only items you will need are basic home repair tools and some marketing materials, such as flyers or business cards, to advertise your services. Insurance is also essential to protect yourself from any potential liabilities; typical insurance cost is from $361 to $792.

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

The ongoing expenses involved in running a handyman business include general overhead costs as well as the cost of maintaining, repairing, and replacing all of your tools. In areas that require certification, you’ll also need to budget for periodic license renewals.

Finally, if you have employees, you’ll face additional costs for salaries and insurance.

Learn more about running a handyman business.

Handyman businesses make money by charging clients for their services. They can either charge an hourly rate or use a fee-per-service model.

Learn more about starting a handyman business.

Handyman businesses have the potential to earn high profits because they tend to operate with low overhead costs and their services are typically always needed.

Learn more about starting a handyman business.

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Article Sources

IRS: Limited Liability Company

IRS: S Corporations


SBA: Small Business Guide

SBA: Choose a Business Structure Guide

US Census Bureau: Small Business Statistics

SBA Office of Advocacy: Data on Small Business

FRED: SBA Data for Small Business