Starting a home service business: a legal checklist

Why the order matters

Starting a business is popular: US business applications totaled 534,947 in September 2026 alone, seasonally adjusted^[5]. Staying in business is harder. Of private establishments opened in March 2024, 77.7% were still operating a year later^[6]. Many of the early failures in the trades are not about skill. They are about a missing license that stops a job, an uninsured claim or a customer dispute with no written terms.

The checklist below follows the order that avoids rework. You cannot open a business bank account without an entity and an EIN, insurers ask for your entity name and license numbers, and your contracts and website should carry the legal name you registered. Work through it top to bottom.

Week one: the legal shell

1. 01

   Choose and check the name

   Search your state's business entity database and the domain name you want. Check that no local competitor uses something confusingly similar.

2. 02

   Form the entity

   Most owners start with an LLC filed with the secretary of state. Compare options in the LLC vs. S corp guide before you decide on taxes.

3. 03

   Get an EIN

   Apply directly with the IRS. It is free, and if the online application is approved the number is issued immediately. The IRS warns against websites that charge for an EIN^[1].

4. 04

   Open a business bank account

   Bring the formation documents and EIN. Keep every business dollar in this account; mixing personal and business money weakens the liability protection an LLC gives you.

5. 05

   Set up bookkeeping

   Pick accounting software on day one and connect the bank account. Categorize as you go rather than in April.

Older checklists include filing a beneficial ownership information report with FinCEN. Under FinCEN's final rule effective August 14, 2026, US companies are exempt from BOI reporting and are no longer required to file^[2]. If a website or mailer tells you otherwise and asks for a fee, treat it as a scam.

Weeks two to four: licenses and permits

Licensing is trade by trade and place by place. Some states and localities require HVAC technicians to be licensed, and nearly all HVAC techs who handle refrigerant need EPA certification^[3]. Most states license electricians^[7], and pest control workers need state licenses that usually involve training and an exam^[8]. Even a handyman or cleaning business can need a local business license, and in some states a contractor registration above a job-size threshold.

One federal rule surprises many new handyman, painting and remodeling businesses: EPA's Renovation, Repair and Painting rule requires anyone paid to disturb painted surfaces in pre-1978 homes, childcare facilities and preschools to be certified, with employees trained in lead-safe work practices^[4]. That includes small jobs such as replacing a window or cutting into a wall for a new outlet.

Insurance and bonds

Get insurance quotes once you have your entity name and license numbers, and before you book a job. At a minimum, ask about:

• General liability, which covers damage to a customer's property and injuries to others. Many commercial clients and property managers ask for a certificate before the first visit.
• Commercial auto. A personal auto policy may not cover a truck used for business.
• Workers' compensation. Required in most states once you have employees, and sometimes for owners in certain trades.
• Tools and equipment coverage for what you carry on the truck.
• License or surety bonds where your state or city requires them for a contractor license.
• Professional or errors-and-omissions coverage if you give design advice, such as load calculations or system sizing.

Paperwork customers will see

Before your first paid job, write the documents that prevent most disputes: an estimate template, a work authorization the customer signs before work starts, payment terms, a warranty statement and a cancellation and reschedule policy. The service terms and conditions guide walks through each clause. If you will sell jobs at the customer's home, read the federal Cooling-Off Rule section there too.

Add a privacy notice to your website that says what you collect through forms and calls, and decide early whether you will record calls. Some states require every party's consent to record, so build the consent wording into your greeting from day one.

A business phone line before marketing

Get a dedicated business number before you print a truck wrap or buy a single ad. Your personal cell will not survive the first busy season, and moving to a new number later means reprinting everything. Plan for how calls are answered when you are on a roof or under a house. Eight in ten Americans say they generally do not answer calls from unknown numbers, and only 19% say they generally answer them^[9]. That cuts both ways: callers will not pick up when you call back from an unknown number, so register your business name for caller ID where your carrier allows it and reply by text when the customer has agreed to texts.

• Record a voicemail greeting with your business name, hours and how fast you call back.
• Decide who covers calls during jobs: a family member, an answering service or an AI Employee such as Ava that answers, captures the job details and books routine visits.
• Write down which calls are emergencies and who gets them after hours.
• List the number the same way everywhere: website, Google Business Profile, truck and invoices.

Taxes and payroll

1. 01

   Register for state taxes

   Sales tax if your services are taxable, and state payroll withholding and unemployment accounts before your first hire.

2. 02

   Plan quarterly estimated payments

   Owners of pass-through businesses pay income and self-employment tax through estimated payments; set aside a fixed share of every deposit.

3. 03

   Choose payroll before you hire

   A payroll service files the forms and deposits on schedule. Doing it by hand is a common source of penalties.

4. 04

   Keep worker classification straight

   Helpers who work your schedule, with your tools, under your direction are usually employees, not contractors. Ask your CPA before you pay anyone on a 1099.

Mistakes that cost new owners the most

• Working under an old employer's license. Many states tie a contractor license to a qualifying person and a business; leaving the employer means getting your own.
• Skipping workers' compensation for a first helper because the job is short. One injury can end a new business.
• Using a personal phone number on the truck wrap, then losing every repeat customer when the number changes.
• Quoting by text with no written terms, then arguing about what the price included.
• Leaving taxes for April. Set aside a fixed share of every deposit in a separate savings account from the first week.

Example: the first 30 days

Example: a fictional licensed HVAC tech leaves a larger company to start on her own in Georgia. In week one she forms an LLC, gets an EIN online the same day and opens a business account. In week two she confirms her state contractor license covers working under her own company name, registers with her county and gets RRP firm certification because many homes in her area were built before 1978. In week three she buys general liability, commercial auto and tool coverage, and writes an estimate form and work authorization. In week four she sets up a business number with a clear voicemail and an overflow answering plan, then launches her website and Google Business Profile. Her first paid job comes in during week five, with every document already in place.