Starting a successful handyman business takes more than knowing how to give a good haircut. Starting a new business requires completing several steps, and obtaining licensing is an important one as it may impact your ability to operate legally.
The question, “what business license do I need to start my handyman business” is a common one, but in reality, your business will likely need multiple licenses, permits, and registrations from federal, state, and local agencies.
Let’s look at which licenses to consider when starting a handyman business.
To not miss any important licenses and permits, we recommend also checking with your local Chamber of Commerce, economic development agency, or use a business license service like Incfile or Corpnet.
What Licenses Do You Need to Start a Handyman Business?
Every state is different when it comes to the rules and regulations for contractors. A handyman license is required in some states, while others only require licensing for particular trades, such as plumbing or electrical. Some states require passing an exam, others require proof of insurance, worker’s compensation insurance and have a bond. You’ll want to research the licensing laws with your state contractor’s board to see what services you can legally offer.
A few examples of state licensing includes:
The Alaska Division of Corporations, Business, and Professional Licensing requires a handyman license when work exceeds $10,000. Additionally, they are required to hold property damage and general liability insurance.
The state of Illinois doesn’t require a handyman license, provided no plumbing work is being done.
In New Jersey, the state doesn’t require licensing to be a handyman, however, they need to register under the Contractors’ Registration Act with the New Jersey Division of Consumer Affairs.
Making matters even more confusing, a handyman can be required to be licensed by the state, the state, city, or county, or just the city or county. It’s also important to know that licensing or registration may be required in each town the handyman is working.
A few examples include of local licensing includes:
In Denver, Colorado, a Contractor’s License is required by the Denver Community Planning and Development office. Licensing fees vary depending on the type of work being performed.
The City of Milwaukee, Wisconsin, requires a Home Improvement Contractor License for any contractors that are working on single-family homes, duplexes, small apartment buildings (6 units or less) and making improvements to the properties on which those buildings are located within the City of Milwaukee.
The Town of Pahrump, Nevada, requires a Handyman License. Handyman services in the town are not able to perform plumbing, electrical, air conditioning, heating, or fire protection unless proper state licensing is obtained.
In addition to handyman-specific licensing, there are also general requirements for starting a business. While licensing requirements vary by location, here are a few of the common licenses and permits that a handyman business may need:
When starting a business, the legal entity needs to be selected. A legal entity refers to how a business is organized to operate. There are four main types of entities; sole proprietorship, partnership, corporation, and Limited Liability Company (LLC).
Each type of entity has its own pros and cons, such as liability protection, costs, and administrative requirements.
Business Name Registration
While not necessarily a business license, it’s worth noting that to use a name for a business, many states require the registration of that name. Making matters more complicated, the process of name registration is different by state and the type of business entity.
For instance, sole proprietorships and partnerships generally need to register a business name (also referred to as a Doing Business As, DBA, fictitious name, or assumed name).
Learn: How to register a DBA
Corporations and LLCs register are a little easier because the name is registered when the entity is formed with the state.
General Business License or Permit
Depending on where the business is located, a general business license or permit may be required. A few states require a business license; however, they are more commonly found at the city level.
Learn more: Business license requirements by state
Federal Employer Identification Number
The Federal Employer Identification Number (also referred to as a FEIN, Employer Identification Number, EIN, or Federal Tax ID Number) is a unique nine-digit number that identifies a business with the Internal Revenue Service (IRS).
Any business with employees or those that form as a partnership, Corporation, and in many cases an LLC, the business will need to get an EIN.
Sole proprietors and single-owner LLCs without employees can instead use the owner’s social security number.
Learn: How to get an EIN
Sales Tax Permit or Business Number
In order to sell products and/or offer certain services, a state sales tax permit (also referred to as a business tax number or tax ID number) may be needed. This permit creates an account number with the state’s Department of Revenue (or similarly named state taxing agency) to collect and remit sales tax.
It’s important to understand state sales tax as in most states, the contractor pays the sales tax on the supplies used, and in other states, the contractor will charge sales tax of the materials to the customer. Additionally, in some states, sales tax will be collected on the labor cost of the project.
In states where sales tax is charged to the customer, handymen can purchase materials tax-free. A resale certificate (sometimes referred to as a seller’s permit) allows a business to purchase inventory, and instead of paying the sales tax to their vendor, they charge the sales tax to the end-user of the product.
A resale certificate only allows a business to not pay sales tax for items being resold, and sales tax will still need to be paid for supplies or equipment.
Certificate of Occupancy
In most communities, a handyman business will likely need to secure a Certificate of Occupancy (CO) before operating in a commercial building. This certificate is typically obtained from the city and/or the county and allows a business to occupy and operate from a building. Before the certificate is issued, the building will need to comply with zoning regulations, building codes, and any other local requirements.
If the handyman business will be operated as a home-based business, a home occupation permit may be required.
Before purchasing or leasing a location for your handyman business, be sure to check with the local zoning department first to ensure the business can legally operate out of the chosen location.
The process of identifying all of the licenses and permits necessary to start a handyman business may feel confusing and overwhelming. It is critical to do this right the first time, otherwise, your business may be temporarily shut down until all licenses are obtained.