Should I Start an LLC for My Organizing Business?
Starting a limited liability company (LLC) for your professional organizing 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 professional organizing business, lawsuits can arise from things like mishandling customers’ private information or failing to fulfill the terms of a customer’s contract by the deadline.
LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your professional organizing business seem more credible.
Recommended: Use Northwest to form an LLC for $29 (plus state fees).
Do I Need an LLC for a Professional Organizing 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 Professional Organizing Business
By starting an LLC for your professional organizing 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.
Professional organizing businesses will benefit from liability protection because of the risks associated with entering client properties and engaging with their belongings.
Example 1: A client’s hardwood floor is damaged while organizing their kitchen. They sue you for the repair and replacement costs. Since your business is an LLC, your personal assets are protected with limited liability so they could not be taken in the settlement.
Example 2: A client is suing you over the organizational advice you gave them, claiming it has led to personal problems like being fired after not being able to find their work resources. Limited liability protects your personal assets so they could not be taken in the settlement.
Example 3: While moving some furniture to show how they could be organizing their office, the client is knocked over and fractures their tailbone. They ask you to pay for the expenses. Being an LLC, limited liability would cover your personal assets so they could not be used to pay for this.
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 Professional Organizing 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 professional organizing 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
Professional organizing 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 professional 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 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.
Since your business revolves around giving advice to your clients, if something goes wrong they may take you to court. Should that happen, insurance would protect your business assets and help cover legal costs.
Common Situations Business Insurance May Cover for a Professional Organizing Business
Example 1: A client who is stressed about their new organizational system panics and pinches their fingers in a filing cabinet you recommended.. General Liability Insurance would cover the resulting medical payments for the injury.
Example 2: You are assisting a client with a new organizational exercise. They are not paying attention and trip over some furniture, giving them a concussion. General Liability Insurance would cover the resulting medical payments for the injury.
Example 3: A client is going through emotional turmoil, claiming that your methods gave them undo stress and anxiety. General Liability Insurance would cover the damage to the client’s psyche and potential therapy sessions.
Other Types of Coverage Professional Organizing 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 professional organizing businesses should obtain.
Commercial Property Insurance
If you own your location instead of renting, you need commercial property insurance to protect the building. If your business is based out of your home, your homeowners' insurance will not cover the home when it is being used for commercial purposes. Property insurance also covers items owned by your business.
Workers' Compensation Insurance
If your professional organizing business has any employees (full-time or part-time), you are legally required to carry workers’ compensation insurance. This type of coverage will help compensate your employees in the case that they get injured on the job.
Read more about workers’ compensation insurance.
Business Interruption Insurance
In the event of a fire, flood, or other catastrophes, there is a good chance your business operations will be halted for some time. Business interruption coverage is designed to help you recoup a portion of the revenue your business would lose due to the inability to operate.
This type of insurance is typically included in a business owner’s policy.
Commercial Umbrella Insurance
Umbrella coverage allows you to extend above and beyond the standard limits of your other business insurance policies. If you are faced with a large lawsuit or other claim situation, there’s a possibility that the coverage limits of your standard policies will be insufficient. In this case, your umbrella policy will allow you to surpass these limits.
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 Small Business Insurance article for more info.
The costs for starting a professional organizing business are minimal as most businesses of these type work from home. Typical costs include:
- Liability insurance
- Advertising
- Transportation
- Computers
- Educational resources
Ongoing costs are minimal, largely consisting of advertising and transportation costs.
Visit our How to Start a Professional Organizing Business guide to learn more about the costs of starting and maintaining this business.
The minimal ongoing expenses you’ll incur include advertising and transportation costs.
Learn more about running a professional organizing business.
Professional organizing businesses make money by charging clients for organization services or classes on an hourly, daily, or task-by-task basis.
Learn more about starting a professional organizing business.
Professional organizing businesses help clients organize items in their homes or commercial spaces. Some of these businesses take on the organizing themselves while others provide training exercises to help clients live more organized lives.
Successful professional organizing businesses have the ability to earn a six-figure annual profit.
Learn more about starting a professional organizing business.
