Chapter 2 – Setting Up Your Handyman Business

Does a Handyman Need to Have a Contractors License?

There are very few areas where a handyman can get a handyman license, so the question becomes: How can I work legally as a handyman and still make a good living?

It seems that every state in the Union has licensing requirements for all aspects of construction.  You have to be a licensed contractor to do any major work…jobs like rewiring a house or remodeling a bathroom.  If you are an unlicensed handyman you must look to the exceptions to the licensing requirements.  What kind of work can be done without a license?

Most states have some kind of “Minor Work Exemption” rule. There are often maximum dollar amounts for a job or some specific types of work that don’t require a license.  These exemptions are where the handyman makes his or her money!  But guess what?  Every state has different rules!

I’ve found that one state sets the maximum dollar amount for labor and materials at $750, while another is $1,000.  Still another state says that you can do up to $3,000 but you have to show that you have liability insurance.

Some states won’t let you do any plumbing or electrical work and won’t allow you to do any work that requires a permit.  It’s maddening really.  InCalifornia, where I live, the limit is $500 but there is an exception which allows the sale or installation of finished products that don’t become a fixed part of the structure regardless of the dollar amount.  So I can assemble furniture and garage storage cabinets all day long!

Everywhere you go you’ll find different rules and it’s impossible to quote them here.  But they all seem to have one thing in common.  They won’t let the handyman break the job down into smaller components to make the totals “fit” the rules and the job can’t be a part of a bigger job that exceeds the limit.

Obviously the government is trying to protect vulnerable consumers from unscrupulous, unlicensed contractors and they have the minor work exemption rules in their sights as a means of protection.  Because of this, we will continue to see the licensing requirements getting tighter and enforcement becoming stricter.

So what is the handyman to do?  How does a handyman business succeed?  Well, we take a closer look at what we are being allowed to do.

We can do repairs all day long.  We can do maintenance, we can do minor jobs like installing trim, power washing and staining a deck, doing trash hauling, touching up paint, or minor dry rot repairs, furniture and cabinet assembly.  We can repair a fence, build a gate and install a screen door.  There are lots of jobs that we can do.  In fact, almost everything we can do a licensed contractor will not want to do.  The jobs are too small for him to send out a worker. There is a definite niche for a handyman and a great need for honest, reliable handymen and women!

Don’t let the licensing limitations stop you.  Use them to your advantage.  Find partners to work with that will refer you the kind of business you can do.

The years spent as a handyman may count toward your experience requirements if you apply for your contractor’s license.  Call a local contractors testing school to find out what you can do now to prepare for getting your license.  They will also be a great resource for information on what types of work you can do in your area without a license.

Nothing I’ve said here has stopped me from making a good living as a handyman.  Whatever you do, I hope you take away from this question one simple idea.  As an unlicensed handyman it’s not our job do bathroom or kitchen remodels or to frame out additions.  That is not the kind of work we should be looking for and we can’t legally build a business based on large jobs.

About Licensing and Insurance

Check with your state or local licensing authority to determine if your handyman work will require a license.  To protect your assets it is very important to get the necessary licenses and that you have general liability insurance.

How Much Insurance Coverage Should I Have?

If my commercial experience is typical, $1,000,000 worth of general liability insurance is a good starting point.  On my latest renewal I discovered that raising my limit to $2,000,000 did not increase my premium.  Ask your agent for quotes on both coverage limits.

The more assets you have, the more important liability coverage is and the more coverage you need.  Please consult your insurance agent for all of the facts.  You will also want to get a full explanation of manifestation or sunset clauses when choosing your policy.

Where Can I Get Handyman Insurance?

Finding coverage is not always easy, especially if you are a first year handyman.  I called around to my local agents and had no luck.  On the internet I found an insurance broker who was able to quote a policy for me. There are a couple of agents on my Resources Page. These policies are becoming more and more available and are often called “Artisan Policies”.

Do I Need to Have a Catchy Name for My Handyman Business?

If you’re interested in selling your business down the road you will want to have a catchy name.  It would be pretty tough to sell Jim Smith’s Handyman Service to Jenny Jones!

But there are some downsides.  Using a fictitious name (any name that isn’t your given name) will cost you some extra money.  Once you’ve chosen the name you’ll be required to register that name with the local authorities and to pay to publish the announcement of the name.  You’ll probably want to have a logo to go along with your new name too and that could mean additional expenses.

This is the route that I chose to take, but in retrospect I could have just used my given name and added “Handyman” as my title.  Besides saving on the cost of the filings and the extra time involved getting the paperwork together, I wouldn’t be on every credit card company’s mailing list under my business name!

Regardless of the name you choose, business cards are a must.  There are some great online print sources for professional looking cards listed on the Resources and Helpful Links section my website: SensibleHandyman.com.  You can lay out the cards online to save on graphics fees.

Order plenty of cards and give them out to everyone you know.  When someone asks for my card I always give them three so they have one to keep and two to pass on.

Who is Required to Have a City Business Tax Certificate?

If you do work within the city limits, where ever you are, there is probably a business license requirement.

Here is a quote from the City of Santa Rosa’s website:

 “Any person whose business is located in the city or conducts business in the city must apply for a business tax certificate within 30-days of the date the business commences. Conducting business in Santa Rosa without a business tax certificate can result in penalties, violation notices, citations and court action.  Whether you’re operating from home or a storefront, office or industrial park, you’ll need a Business Tax Certificate.”

As you can see, cities are anxious to register your business and collect a business tax!  Is your city the same?  Fortunately these taxes are usually very small but they do require some extra paperwork.

Go to your city’s website or call your city hall.  If you’re required to have one, bite the bullet and get it for every city in which you will be doing business.

Do I Need a Resale Permit and Should I Use Resale Certificates?

Yes, if you’re going to have taxable sales you’ll be required to have a Resale or Sellers Permit number and to collect and remit sales taxes to your state.

Upon applying, you will be issued a resale number to be used when filing your sales tax return.  You can also file this number with your suppliers (on Resale Certificates) to avoid paying sales tax at the register when making purchases for resale.

I choose not to file Resale Certificates with my suppliers.  Because of this, I pay sales tax on my materials even though they will be resold.  The benefit to me is that I have a much smaller sales tax bill when I file my sales tax return.  Why do I owe less?  The reason is simple: my tax liability is smaller because I am credited at the end of the year for all of the sales tax that I paid on those purchases.

For example, if I sold $20,000 of taxable materials to my customers last year at the 7.5% tax rate, I would have collected $1,500 in sales tax from my customers.  However, let’s say that those purchases for resale cost me $16,000 on which I paid $1,200 in sales tax at the time of purchase.  At the end of the year I would only owe $300 in sales tax to the state instead of the $1,500 that I collected from my customers.

$20,000 x 7.5% = $1,500 collected from customers.

$16,000 x 7.5% = $1,200 paid at time of purchase.

$1,500 – $1,200 = $300 sales tax liability.

If you choose to give resale certificates to your suppliers to avoid paying taxes on your purchases you will end up with a larger tax liability at the end of the year ($1,500 vs. $300).  Additionally, states base the frequency of your returns on the amount of sales tax due.  You may find yourself being asked to file more frequently (quarterly vs. annually).  Ugh, that would mean more tax planning and additional paperwork.

One more added complication of purchasing on a resale certificate is that you will be liable for sales tax on any of the tax exempt purchases made for resale that are later withdrawn for personal use.  The total purchase price of these items must be tracked and entered into the tax return to correctly calculate your tax liability.

For my business, I’ve decided to just keep it simple and avoid the use of resale certificates, effectively paying my sales taxes as I go.

Why Does My Handyman Business Need General Liability Insurance?

Insurance is necessary for two important reasons.  Insurance will help to protect your assets in case something goes wrong with a job that you complete.  Secondly, it will bring you more business.  In fact, chances are that it will bring in far more revenue than the cost for coverage.

There are many handymen working in my area and it would surprise me if more than 1 out of 10 carries general liability insurance.  The fact that I have insurance sets me apart from my competition and has helped me get additional jobs.  I don’t hesitate to let people know I have it.  “Insured” is on all of my printed materials and business cards.

Having insurance has also opened the commercial market for me.  I have done work for professional management companies that have needed small jobs done at their retail stores.  One of these companies required that I have at least $1,000,000 in general liability insurance, the second wanted $2,000,000.  Interestingly, when I told them about my $1,000,000 coverage limit they still wanted me to do the work.  This proved once again that a good handyman (especially one with insurance) is hard to find!

Do I Need an Email Address and My Own Domain Name?

Yes on both counts.  An email address and a domain name will help to build your credibility.  They prove that you are serious about your work and give your clients another way to communicate with you.

I encourage you to get your own personalized domain name and use it for your email address and your webpage.  There are many free email services and free web hosting services out there and you may be tempted to save money by choosing one of these.  Before doing that, consider these two email addresses:

[email protected]  vs. [email protected]

Who would you rather do business with?

Should I Ask To Be Paid in Cash?

No.  And don’t offer a cash discount.  Never tell a customer that you prefer to be paid in cash.  Asking for cash is bad business and a dead give away that you are cheating on your taxes. If they pay you in cash, accept it!

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