Start A Cleaning Business: First Things First - Legally Declaring Your Cleaning Business

It may be very tempting to gather your cleaning supplies, put an ad on Craigslist, and start cleaning houses. Just because many people take this approach doesn't mean that this is particularly the right route for you. Far from it. Getting your business in line legally right from the start will keep you out of hot water in the long run.

Unfortunately, you could get burned very easily by jumping into things so quickly. Not only could you get yourself in hot water with the IRS, but you risk being financially liable for damages that may happen while you're on a job.

For starters, this discussion is limited to setting up a small business in the U.S. Other countries and territories will probably have similar requirements, but you never know until you do your research.

All About the Feds

Whether you apply for a Federal Tax ID or not depends on what kind of a business entity you want to set up.* If you'll just be working alone and never have employees you could remain a "sole proprietor", not get a Federal Tax ID, and file any income under your regular Social Security number at tax time.

If you anticipate having employees then you need to get that Federal Tax ID, also known as an Employer Identification Number. Also, if you set up your business in an entity other than sole proprietor - like a limited liability corporation (LLC) - you'll need a Federal Tax number.

Go through these questions at the IRS to see if you're in a category that needs to file for an Employer Identification Number.

If you'll always be working by yourself you may wonder why you'd consider any other business setup other than sole proprietor.

Depending on the business insurance your get setting up an LLC will add one more layer of insulation between you and financial ruin (inquire with an insurance agent to see what business entity and insurance policy is most appropriate for you).

Researching Your State's Business Requirements

Nowadays the easiest route to doing research is to do an Internet search. Even if you don't have a computer and Internet connection at home you can visit your local library. If you happen to use your library for research you can always ask questions of the librarians to help you find the information you need.

Even just placing a call to your State's Department of Revenue and asking where to start with setting up a home cleaning business will put you in the right direction.

Local Business Requirements

After you've filed the paperwork at the State level it's time to research what your local government may require. Most counties or cities probably do not have requirements for business registration, but you don't know until you ask.

You could even start by asking the local Better Business Bureau if they know about requirements surrounding setting up a cleaning business. You might find out about a local association or organization of cleaning services that you'd want to join by talking with the BBB.

The Issue of Insurance

If you're going to be spending any time on somebody else's property earning money you put yourself in a whole different legal category than "visitor" or "guest". You've just crossed the line into being liable for any damage you incur while there. Your earnings - and possibly savings and future earnings - could go up in smoke at the slightest mishap.

What to do to protect yourself? Get some business liability insurance. Every insurance company has different nuances in the business policies they offer. It's also in your best interest to shop around. Going to at least a couple insurance agents will give you the best idea in what kind of coverage you can get for a particular premium.

Levels of Risk

In the end you have to decide how much risk you want to take with flying under the tax and insurance radar - or legitimately setting up your cleaning business. Weigh how much you can earn by cleaning houses against what you'll pay for insurance. Paying out taxes and insurance can be a hard pill to swallow, but in the long run you'll be able to sleep at night knowing you've set up a "clean" business (pun intended).