Should I Start an LLC for My Cleaning Business?

Starting a limited liability company (LLC) for your 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 cleaning business, lawsuits can arise from things like one of your employees damaging a customer’s property or belongings, as well as getting injured while carrying out a cleaning service.

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

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

Gloved hands surrounded by cleaning supplies

Do I Need an LLC for a 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 Cleaning Business

By starting an LLC for your 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.

Cleaning businesses will benefit from liability protection because of the risks associated with visiting and cleaning clients’ homes or businesses.

Example 1: While cleaning a customer’s apartment, an employee ignores specific instructions for cleaning a rare and fragile item belonging to the customer. This leads to the item being irreparably damaged and the customer suffering a great financial loss. As a result, the customer sues your cleaning business for this property damage in order to recoup this loss. Your personal assets would be protected by limited liability from any business requirements to pay damages.

Example 2: After a customer’s house was cleaned, he could no longer find a set of keys. The customer alleges that one of your employees stole them and thus brings a civil theft case against the entire company. Employers can also be held vicariously liable for theft committed by their officers, paying up to triple the damages. In this case, limited liability would ensure that such damages could only be levied against your business’s assets.

Example 3: While an employee of your business was cleaning a customer’s house, the customer returned home and slipped on the wet floor, breaking her wrist as a consequence. This induced the customer to sue your business for the bodily harm she suffered as, as she alleges, a result of the negligence of your business. In this instance, liability for any damages the court imposes on your business cannot extend to your personal assets.

Example 4: While one of your employees is cleaning a client’s business location, they accidentally spill a cleaning agent over some electronic equipment. Covering the cost of replacement equipment for the company could be a large financial burden for your business.

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 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 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

Cleaning business sometimes 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 LLCs need insurance, as the limited liability offered by the structure only protects the owners' assets, not the business's assets. For a cleaning business, these assets may prove costly (e.g., equipment, vehicles, etc.).

Common Situations Business Insurance May Cover for a 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 know 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 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 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 and commercial auto insurance.

Read our Business Insurance for Cleaning Companies article for more info.

A basic cleaning business can be started with as little as $1000. This should be enough to cover the supplies you will require in addition to liability insurance between $500,000 to $1 million. Cleaning businesses on a larger scale, such as those with a fleet of vehicles, should expect startup costs to range from between $10,000 to $30,000.

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

Your expenses will depend on the size of your business. Your largest expenses will likely be payroll and equipment costs.

Learn more about running a cleaning business.

Cleaning services make a profit by charging clients for various cleaning services based on hours worked, square footage, or contract agreement.

Learn more about starting a cleaning business.

Cleaning businesses offer a variety of cleaning services to aid businesses and homeowners. Some cleaning businesses have a large number of employees, while others are only individuals hired by clients to clean establishments on a routine or sporadic basis. The average cleaning business can have profit margins of up to 48%.

Learn more about starting a cleaning business.