Should I Incorporate My Handyman Business?

What legal business structure should I choose?  The three most commonly chosen legal business structures are Sole Proprietorship, Limited Liability Company (LLC), and S Corporation.  Because I am not a lawyer or a tax attorney I am not qualified to recommend one structure over another.  I can only tell you what I have done and strongly recommend that you consult with an attorney and an accountant before making your final decision.


I chose the simplest and most basic structure you could set up, with all of its benefits and pitfalls – the Sole Proprietorship.  As a Sole Proprietor income is reported on the individual income tax return (1040, Schedule C) so there is very little additional paperwork.  If you choose this option you represent the company legally and fully and you are personally liable for all debts and actions of the company.  If something went drastically wrong with a job you completed your assets could be at risk.  This makes it very important to carry sufficient liability insurance.

I suggest you seriously consider forming an LLC, particularly if you have a lot of personal assets and/or will be hiring employees.  Since the handyman trade could be considered a high risk industry, many handymen choose this option.  This structure affords the members (owners) the liability protection of a corporation.  Unfortunately, this liability protection may not be complete as you could still be held personally liable for your actions if you have signed a personal guarantee.  Personal guarantees are often required by banking institutions if you get a business loan.

A third option, often chosen by contractors is the S Corporation (Small Business Corporation).  This structure allows the profits to be taxed in a way similar to a Sole Proprietorship avoiding the double taxation problem inherent to the corporate system.  As with the LLC, the presence of a personal guarantee would leave the owners personally responsible for debts.

For inexpensive legal advice I became a member of Pre-Paid Legal Services.  This is an extremely low cost legal service that I have found to be a great asset.  For less than $20 per month you have legal advice that is just a phone call away.  It’s a lot like having a lawyer on your payroll!  Pre-Paid Legal associates are easy to find and they will be glad to sign you up.