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Volume 14
April 2009

Greetings!

We field a lot of questions here at the Clean Team Pro from owners of cleaning companies.Where do I apply for a license? How do I get insurance? What's a surety bond ... and do I need one?

This month, we are revealing some simple answers to these nitty gritty legal questions. Check out our feature article for a step-by-step checklist on how to license, insure and bond your company to registering your DBA and EIN. (Not sure what those acronyms mean? Don't worry... keep reading!)

And don't forget to scroll down to our new feature on Using Clean Team Products. This month, we're spotlighting the powerful action of our pair of stain-fighting products: the Stain Assassin and the Stain Gobbler. Learn when to use which product to get a total knock-out.

Navigating the Sea of Paperwork:
From License to Insurance

paperwork, coloful

Starting your new cleaning company can be very exciting! It can also be frustrating -- especially when it comes to navigating the sea of confusing paperwork that is required of small business owners. Eliminate the confusion by following this step-by-step checklist to setting up your new cleaning company.

Step 1: Apply for Your Business License
Depending on where you live, you are probably obligated to apply for a license before you may legally operate your cleaning company. Even if you aren't required to have a license, it certainly can't hurt to get one!

To determine your licensing requirements, visit the county government office in your hometown (or the town in which you will be operating your business). You might also check your city's website or give them a call.

Most new cleaning companies are small, home-based businesses, which are only required to have a local license -- as opposed to state or federal licensing. Applying for a local license is usually a quick and easy process; you should be in and out in less than an hour.

When you finish the paperwork, you will receive a temporary copy of your license. The permanent copy will be mailed to you in two to four weeks. Be sure to file this document away with your official business paperwork.

Cost: The fees to obtain a business license vary by county and can range upwards of $125. This is a business expense, which may be deducted on your annual taxes -- so save your receipt!

Helpful Tip: While you are at the local county/city office, check into zoning regulations and property covenants. There may be restrictions on operating a business out of your home, which you need to know about. Likewise, if you live in a community with a Homeowners Association, you should consult the bylaws about operating a home business -- before you get slapped with an annoying fine. However, most cleaning businesses may operate out of their home without upsetting neighbors or city fathers because our business is really located where we do the cleaning jobs.

Useful Links:

State-by-state listing of where to obtain your business license

Step 2: Register Your Business Name (DBA)
Now that you have your temporary license, you can apply for your so-called fictitious business name, also known as your Doing Business As (DBA) name. Even if your company's name is the same as your own first and last name, you will likely need to file for a DBA certificate so that you can open a business checking account (see more below).

In most states, you can obtain your DBA in the County Clerk Recorder's office of the county in which your business will operate. While you are there, you should
check courthouse records to be sure there aren't any other businesses already operating under the name you have selected.

Your DBA certificate will be mailed to you, typically within a few weeks. Keep the certificate on file, along with your license.

Cost: Fees for DBA certificates vary widely, but generally do not exceed $20. Be sure to save receipts for any business related expenses until tax time.

Helpful Tip: If you choose to incorporate your company, registering your business name is a part of that process. In many states, you can even check an online database of incorporated businesses to make sure you are using an original name.

Useful Links:
8 Mistakes to Avoid When Naming Your Business

How to Name Your Business

Step 3: Apply for Your Employer Identification Number (EIN)
If you have (or plan to have) employees, you need an Employer Identification Number (EIN), also known as a federal tax ID number. An EIN is a nine-digit number, like your personal social security number, but for your company. You will use your EIN when filing your quarterly and annual taxes, opening your business bank account, and applying for a business line of credit.

The simplest way to get your EIN is through the IRS website. The process takes less than 10 minutes and at the end, you will receive a copy of your EIN. Print this out and file it away with your DBA certificate and business license. You can also apply by phone or fax.

Cost: The IRS does not charge a fee to obtain your EIN.

Helpful Tip: If an attorney or small business service wants to charge you a fee to get your EIN, do it yourself for free.

Useful Links:

How to Apply for an EIN

Get Your EIN Online Now

Step 4: Investigate & Purchase Liability Insurance
Most of the paperwork involved in starting up your business is now behind you. All the remains is researching and choosing a liability insurance policy (and possibly having your company bonded, see Step 5).

While not all states require small businesses to carry liability insurance, you may want to invest in a policy that will protect you and your assets in the unfortunate event of a lawsuit. General liability insurance will cover:

Any injuries sustained on your business premises by employees, customers or vendors

Any injuries sustained as a result of employee action or negligence

Any injuries sustained by employees on a job site

Most companies that sell auto, home and life insurance also sell business liability insurance. Start by checking with your personal insurance carrier, but be sure to shop around for the most competitive quote. If you find liability insurance to be prohibitively expensive, we've found that most homeowner's insurance policies will cover accidents in the home where you're cleaning. Do a little research about homeowner's policies in your area so that you can speak knowledgeable about it if a prospective client asks.

Cost: Liability insurance is not cheap. A typical policy for a small business with fewer than 10 employees will cost upwards of $150/month.

Helpful Tip: Like auto or home insurance, liability insurance policies vary widely in terms of what they cover. Before being enticed by the lowest price, make sure that the policy will really provide you with the necessary coverage.

Useful Links:

Liability Insurance For Your Small Business

Step 5: Research & Make Decision About Bonding
A bond is a financial guarantee from a third party to your customers. Bonding companies will typically only issue bonds equal to the amount of your liquid assets. In some states, cleaning companies are required to be bonded. But even if your state doesn't require it, a customer may ask about it -- especially if you have commercial contracts.

There are two types of bonds relevant to most small cleaning companies:

Fidelity bonds, which are designed to protect your clients from theft by you or by one of your employees. You can purchase a fidelity bond to cover specific employees or all of your employees -- or to cover a specific job or a series of your jobs. Keep in mind that a bond will only cover the cost of theft if there is a criminal conviction in the case. This is the type of bond you will most likely be interested in.