Setting up your business correctly will save you legal and tax problems down the road. Here’s a step-by-step to get your paint business off the ground.
Step 1: Determine business type.
Starting out, filing your business as an limited liability company (LLC) will most likely be best. An LLC provides liability shelter for small business owners.
Filing as an LLC can be done with your secretary of state. Just google “[your state] secretary of state”. Most states give you the option to file online and charge around $150.
Down the line, if your business earns profits above $75,000 or so, consult a tax accountant on whether you should incorporate as an S Corporation to save money.
Step 2: Get a contractors license, if necessary.
Some states require painting companies to register for a license. Check with your state’s website or local state government office.
Research as soon as possible. Some states only require a license if your business plans on doing large jobs over $30,000. Others require all paint businesses to get a license. Licenses can cost hundreds of dollars, depending on the state.
Step 3: Get a federal Employer Identification Number (EIN).
An EIN is how the IRS identifies your business for tax purposes. You will also likely need this for a business bank account.
Step 4: Set-up a business bank account.
Once you have your LLC articles of organization and your Federal EIN, you can set up a business bank account.
It is crucial, from the beginning, to separate your personal and business finances. This will allow your bookkeeper to give you an accurate picture of your business finances and advise you. Additionally, keeping your business transactions separate from personal will allow your tax accountant and bookkeeper to keep your books audit proof.
You might have to keep a minimum balance in your business bank account (usually $1500). However, some banks do not require this. Shop around.
Step 5: Get insurance.
Painting companies usually need general liability insurance and workers compensation insurance.
General liability insurance protects the business owner from lawsuits involving bodily injury, personal injury, and property damage. A painting company should look at getting general liability insurance covering $1,000,000 per incident. This usually costs around $125 a month.
Workers compensation insurance provides wage replacement and medical coverage for employees injured on the job site. Coverage and costs varies widely for this type of insurance. This is only required if you have employees working on job sites. If you only work with independent contractors, you might not need it. If you are not sure whether your workers are employees or independent contractors, read this.
Step 6: Produce marketing materials.
Some basic marketing materials you should consider is door flyers, yard signs, business cards, and estimate contracts.
Also consider building a client binder with before and after pictures of job sites you have completed and recommendations from previous clients.
Step 7: Get a competent bookkeeper or accountant.
Even if you are starting off, a competent bookkeeper can provide useful guidance on managing your business finances starting out. The bookkeeper can also get you setup with cloud-based bookkeeping software, like Xero or Quickbooks to keep paperwork (and headaches) to a minimum.
Also ensure you consult a tax accountant. As a startup business you can deduct up to $5,000 of certain expenses in the first year.
If you would like to learn more business tips for paint contractors, make sure you get your FREE instant access to my ebook and video series for paint contractors.
About the Author
Daniel Honan is a bookkeeper and tax accountant who is also a former painting business owner and military officer. With his painting and accounting experience, he is uniquely positioned to help painting contractors save time, money, and resources.