Carpet Cleaning Business Formation: Corporation vs LLC

One of the most important factors to decide when creating your own carpet cleaning business is how you’ll structure the organization. The way you set up your business affects how your carpet cleaning business will be taxed, so you must choose the best structure for your financial objectives.

New businesses are typically structured as either a Corporation or a Limited Liability Company (LLC). Each option has its pros and cons and affects your daily business and legal operations as your company grows. To decide whether you should start a Corporation an LLC or for your carpet cleaning business, explore the difference between the two business structures and how each affects your carpet cleaning business.

Corporation vs. LLC

To choose between a Corporation or LLC for your carpet cleaning business structure, it is helpful to look at the difference between an LLC and Corporation.

Limited Liability Company (LLC)

An LLC is a business structure that is common among businesses owned by one individual or multiple partners. One of the most significant benefits of an LLC is that it protects your personal assets in the case of losses against the company. An LLC also offers certain tax benefits over other structures, such as pass-through taxation rather than double taxation on the company’s profits and losses.

Although LLCs can be used for businesses of any size, they are most common among small businesses with few shareholders, making them an excellent choice for someone just starting out.

They also have fewer regulations than a Corporation and do not require members to adhere to strict rules set forth for Corporations. An LLCs’ daily operations are based on operating agreements, which are a set of rules that the owners decide on when starting the business.

The biggest downside to an LLC is that it may limit your ability to grow into a larger entity. LLCs are not as apt to attract investors, so if you cannot get a loan on your own, it may be hard to raise the capital to grow into a more profitable business.

Corporation (S-Corp vs C-Corp)

A Corporation is a business structure preferred by those who plan to run a larger company with potential growth options and many partners. Like an LLC, Corporations protect you as the owner from personal liability.

However, there are many differences both in operations and taxation between the two. For instance, Corporations must have a board of directors, adhere to strict regulations about meeting and record-keeping, and can be taxed twice, both as a business and at the individual level, which is difficult for small business owners. In addition to these requirements, Corporation owners must be U.S. Citizens.

There are two types of Corporations, S Corporations, and C Corporations. C Corporations allow for unlimited shareholders and are recognized internationally. They require a board of directors, compliance upkeep, meticulous record-keeping, and are subject to double taxation. S Corporations are typically better for smaller businesses, with less than 100 shareholders. This type of corporation is only taxed once, just like an LLC; however, it functions as a C Corporation in other respects.

Corporations are more complicated to start than an LLC and require adherence to more strict requirements; however, they are preferred by investors. Starting your carpet cleaning business as a Corporation creates the potential for exponential growth in the future.

Do I Need a Lawyer to Start an Entity?

Although the best course of action is to work with a lawyer to start your business, it isn’t much required for a carpet/duct cleaning business start ups. Opt to work with online platforms like Legal Zoom or any other similar companies to find the paperwork you need to get your LLC or corporation started. These companies can process your LLC or Corp completely and do it for you. Your state will also have small business guidance available, and many have paperwork online to help you get started. As your business grows, you may choose to work with a business attorney to solidify or change your bylaws or operating agreement, but you don’t need this to start your business.

Keep in mind that you can also file for Sole proprietorship (Individual) rather than LLC or a Corporation (at least for the first few years in business). In most cases this will be the lowest cost alternative to register your company and you can do it yourself at your local county clerk or through Legal zoom or other companies who offer such services.

How Do I Start My Carpet Cleaning Business?

To start your carpet cleaning business, you’ll need to take a few steps. These include crafting a business plan, registering your business, and getting the right equipment and training.

1. Business Plan

Your first step in starting your carpet cleaning business is to create a business plan. A business plan helps you define your goals and develop a clear vision for your company. Include the following information in your business plan:

• What your target audience needs and how your business meets that need
• How your business is unique
• Who your target customer is
• How you are better than your competitors
• How your company fits into the carpet cleaning market
• The products and services you provide
• Your marketing plan basics
• What your goals are and how you will measure those goals
• Your financial plan
• Who is working for you and in what capacity

2. Register Your Business

After creating your business plan, make your final decision on how to structure your company. Base your decision on your overarching business goals and choose the structure that allows for the taxation situation and growth opportunities that align with your objective. If you are wondering, do I even need an LLC or Corporation for my carpet cleaning business? The answer is YES. Operating as a sole proprietor puts you at risk for liability for your business, so you need to protect yourself by registering as an LLC or Corporation. Check your state’s requirements for starting a business and fill out the appropriate paperwork to legalize your new company.

3. Get Your Equipment and Training

To start operating and profiting, invest in the proper training and equipment for your carpet and upholstery cleaning business or air duct and dryer vent cleaning business. One of the biggest mistakes new owners make is to jump into servicing customers without proper training or equipment.

DryMaster offers support in the form of coaching and training and world-class carpet cleaning equipment to get your business off the ground while making a profit from the beginning. Once you establish your company as a team of experts, you’ll be on your way to running a successful business.

What is the Cost of Starting a Carpet Cleaning Business?

It is no surprise that as you move through the carpet cleaning business formation process, you’ll need some capital to cover the costs of starting a carpet cleaning business. These costs likely include:

• Registering as an LLC or Corporation
• Carpet cleaning equipment
• Carpet cleaning solvents
• Transportation and vehicles
• Equipment storage
• Liability Insurance

To help you save on costs, DryMaster provides you with marketing materials so you can avoid investing in marketing materials on your own. The overall cost of starting your carpet cleaning business with DryMaster is estimated at $2,030 to $12,595, a number that is significantly lower than most startups require.

Get Your Carpet Cleaning Business Started Today

If you are ready to make your entrepreneurial dreams come true, become a DryMaster affiliate today. Contact us at 1-855-848-3076 to find out how to start your carpet cleaning or air duct and vent dryer cleaning business.