Business Setup

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 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.

Do I Need to Keep a Mileage Log?

Yes.  At the time of this writing, IRS Form 2106 instructions (for 2008 returns) had this to say about record keeping for your vehicle: “You cannot deduct expenses for travel…unless you keep records to prove the time, place, (and) business purpose…of these expenses.”

I keep a small spiral notebook in the visor of my truck.  Each morning I list the names of the jobs I’ll be doing and the current odometer reading.  As I go from job to job, I record the odometer reading.  At the end of the month, this page is torn from the book and added to the file that I keep for each month’s receipts.  (Every month has its own folder.)  When matched with invoices these logs serve as my written record of mileage and business purpose.

In the same spiral notebook; record the money you spend for gas, insurance, registration, maintenance and repairs of the vehicle.  Save your receipts.  At year end you will decide whether to take the standard mileage rate or actual expenses on your taxes.  Check the tax codes for limitations and for the current mileage deduction rates.

Can I Open a SEP-IRA Retirement Account?

According to the IRS; businesses, corporations and self-employed individuals can open retirement accounts including the SEP-IRA.  As a self-employed handyman the amount you can contribute is dependent on your profit for the year.

It is not easy to calculate your allowable contribution.  Always looking for a bargain, I opened a SEP-IRA at one of the large discount mutual fund families.  Their retirement planning department was great about answering my questions, they calculated my allowable contribution and all of their advice was free! Check with a tax professional or a financial planner to see if you qualify.

About Invoicing and Billing for Handyman Work

To promote a professional image and set yourself apart from your competition, you must use a professional looking invoice.  Customers appreciate having a paid invoice and you will find that all commercial work will require it.  The invoice that I use carries my logo, name and address, and has a place for the customer to sign that they have accepted the job as completed.  I leave a copy with the customer and keep the signed top copy for my files.

You can find handyman invoice templates here.  Print out the template; paste your logo at the top left and your name and address into the top right box and take it to your local full service copy store.  Have them create 2 part NCR (no carbon required) forms.  You should end up with 200 invoices for around $50. This is a real bargain when you consider the level of professionalism you just added.  If you will be doing commercial work, you should consider having the invoices printed with sequential numbering.  The numbering can be done at the time the NCR forms are printed.  Aluminum invoice boxes can be purchased at office supply stores to hold your invoices.

What About Billing Customers for Completed Work?

If it brings you more business, just say “Yes.”  This has come up in three different situations.  When I’ve done commercial work, work for a property management company or while doing pest repairs for real estate agents.

The problem with billing customers on account is the time delay in receiving payment.  Commercial accounts often take up to 90 days to pay and require extra paperwork when requesting payment.  Completed pest work is often paid through escrow when the house is sold and can take 30-45 days for receipt.  In all cases, the submitted bill has proven to be as good as money in the bank but you must allow for the extra time.

Should I Accept Personal Checks?

Yes!  Most customers pay by check.  However, when in doubt do what the corner merchant does to cover himself.  Write the customer’s driver’s license number on the check to prove you checked their ID.  In order for the police to help you collect on a bad check, you will need to be able to prove who it was that signed the check.

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!

What About Preliminary Notices and Mechanics Liens?

Here is a definition for you:  A Preliminary Notice contains language which describes the details of the contract and who the interested parties are to the transaction.  It also makes a statement to the property owner that a mechanics lien could be placed on the subject property, what the consequences of such a lien placement are, and what their remedies would be.  The placement of a Mechanics Lien helps to ensure that you receive payment for your services.  The owner of the property will not have clear title until the lien is released.

I’ve never filed a Preliminary Notice or a Mechanics Lien for work that I’ve done as a handyman.  Would I be sorry that I hadn’t?  Yes, if I’d done work for a homeowner or a contractor and never got paid!

As a handyman, we continually work under the assumption that we will be paid for the work that we do.  If payment is never received, the homeowner has great leverage against us.  It is usually impossible to repossess the work that we did.

A Mechanics Lien is our way of insuring that we receive payment.  The Preliminary Notice is the first step in the process and it lets the homeowner know that a Mechanics Lien could be filed.  This in itself is often sufficient to prompt the homeowner to pay for the work making the actual filing of the mechanics lien unnecessary.

Check your local authorities for details.  Each state has its own filing requirements, time restrictions and laws.

Does the Truck I Drive Really Matter?

Ford Ranger with Magnetic Signs and Roof Rack

Yes!  A handyman’s truck should tell the world that they are dealing with a reasonably priced professional.  It should indicate to your customers that the owner is clean, organized, efficient, and serious about their work.

Buy a good used truck or a basic new truck like I did.  Don’t get anything too flashy because it will make you look too successful.  Better to be simply clean and reliable.  A little extra fuel economy doesn’t hurt either (I drive about 1,200 miles per month).

The picture shows my truck.  I carry nearly all of my tools with me.  This has proven to be a good practice because it enables me to do the unexpected job and reduces the “I don’t have the right tool” frustration factor.  In order to do this, I needed a truck with a shell or a tool van.  As you can see, I chose a small pickup with a standard shell and a small rack on the roof.

The disadvantages of my set up are probably clear to you.  First, the rack on top is too light to carry large lumber loads.  A standard rack would have been a better choice.  I continue to manage with this small rack but I am often pushing tools aside in the bed to make room for lumber.

Next, the camper shell should have been a workman’s shell with side access to the bed.  That would save a lot of crawling into the bed to retrieve items stored toward the front of the vehicle.  A workman’s shell would also be more secure with stronger locks and no windows.

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