How To Open a Car Detailing Business
Do you love cars and making them look brand new? If you are looking for a business that is easy to start up and combines your love of cars, you may want to open a car detailing business.
People are holding on to their cars for longer and paying to keep them in good condition. In addition, 97% of Americans prefer professional car cleaning services to washing their vehicles.
Before you begin, it is best to know how to detail a car correctly. First, you start with a deep cleaning of the car's interior and exterior. Then you use polishes and waxes to restore and protect the vehicle. To get experience, you can work for an auto detailing business and learn the trade.
Alternatively, you can watch videos or take online courses teaching you cleaning and detailing methods. Also, you can find online certification courses to teach you the techniques. But you do not need certification to operate a detailing business.
Once you understand how to clean and detail cars, it is time to plan your business's legal and financial structure. This step-by-step guide will help you set up your auto detailing company for success.
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Write a Business Plan
A business plan organizes the framework for your venture. Creating a business plan helps you identify what you need to do to launch your company.
Look for your business's strengths, weaknesses, opportunities, and threats. For example, in a car detailing startup, you will want to address specifically:
- How will you structure your business?
- Will you operate an on-site location or as a mobile detailing business?
- Who is your potential customer?
- What is your market area? Who is your competition?
- Who will run the business? Do you need employees?
- What services will you offer?
- Will you offer package pricing or provide additional services?
- What equipment and supplies do you need?
- What are your projected sales and revenue?
- How will you fund your business?
- How will you acquire customers?
Choose a Name for Your Business
Choosing the right business name is crucial because it is your brand. Your name might incorporate services you offer or the area you service, for example, "Springfield Car Detailing."
Make your name easy to spell and remember. You may use your name or have a catchy title, for example, "Dave's Divine Detailing."
There are things you shouldn't do when naming your business. First, be sure your name cannot be confused with another business.
There are two ways to check for prior registered names. First, conduct a name search through your local Secretary of State. Most have an online research tool for all registered businesses where you can check that your name is available.
Second, search the name to see if it is already trademarked. Businesses trademark their name with the United States Patent and Trademark Office (USPTO). Use the online Trademark Electronic Search System TESS to find prior name registrations.
Choose and Register Your Business Structure
You can operate as a sole proprietorship, corporation, or limited liability company (LLC). However, when choosing your business structure, think about protecting yourself from lawsuits and avoiding double taxation.
Double taxation means you pay corporate taxes for your company and then pay taxes on revenue you receive from the business on your personal income tax return.
The most common business structure is a sole proprietorship. This is a one-person business and the easiest to operate. You record all profits and losses of your business on your personal income tax return. The advantage is that there is no double taxation.
However, a sole proprietor is personally liable for any business debts or lawsuits against the company.
Therefore, you want to separate your business operations from your personal assets. You can do this by forming a corporation or LLC.
A corporation is a separate business entity. So, if someone sues your corporation, they can only go after the assets in your company. This way, you protect your personal assets from the liabilities of your business operation.
There is a drawback to a corporation, however. A corporation subjects you to "double taxation." Essentially, profits are taxed both on owners' personal income taxes and on the business's tax filing.
However, there is a way to avoid double taxation. You can file IRS Form 2553 for an S corporation status. This election will let you record the income and losses of your business operation on your individual tax return.
Limited Liability Company (LLC)
One-person businesses frequently form a limited liability company (LLC). An LLC provides the personal liability protection of a corporation and offers the tax advantages of a sole proprietorship.
A one-person business is a single-member limited liability company (SMLLC). When you have the LLC behind your business name, you show your customers that you are legitimate.
Because you want the best structure for your business, it's a good idea to consult a local business attorney or accountant.
Register Business Structure with State
Register your business structure with the Secretary of State's office in your state and pay a filing fee. This registration also secures your business name in the state.
Apply for Employment Identification Number (EIN)
After registration, you can apply for an Employment Identification Number (EIN) with the IRS. This number is an identification number for your business. Also called a taxpayer identification number, you use it to open bank accounts and apply for business licenses. Additionally, your file all employment and business taxes using your EIN.
Apply for License and Permits
You must apply for business licenses and permits needed to operate your car detailing business. You will likely need the following licenses:
General Business License
Whether you operate a mobile car detailing business or have a physical business location, you need a business license. Check with your state, local county, or town business license office for the application.
Car Detailing License
Not all states require a separate car detailing license. However, check your state laws. For example, suppose you are a car detailing business in California. In that case, you must register your business with the California Department of Industrial Relations.
There are additional permits if you plan to operate your car detailing business in a physical location.
Certificate of Use and Occupancy
A certificate of use and occupancy allows your car detailing business to operate at a fixed location. Whether you own or lease a space open to the public, you need a use and occupancy permit.
If you sell car wash products or automotive accessories as part of your business, you may need a seller's permit.
Keep Up To Date on EPA and OSHA Regulations
Any car detailing operation should know the environmental concerns and occupational hazards of their business.
Environmental Protection Agency (EPA)
The EPA's Clean Water Act prohibits car detailers from discharging pollutants into storm drains. In addition, your county has rules regarding water reclamation. Know the federal, state, county, and city regulations to avoid fines.
Occupational Safety and Health Administration (OSHA)
OSHA protects employees from workplace hazards by promoting workplace safety. For example, there are dangers of chemical exposure and injuries from equipment in the car cleaning industry. Understand the risks of your business and take steps to minimize threats.
Know Your Costs and Secure Financing
As a one-person mobile car detailing operation, you may not need a lot of money to start your business. But know all your costs first.
Purchasing a pressure washer, buffer, wet/dry vacuum, water extractor, etc., can add up quickly. The cost of equipment alone could range from $3,000-10,000. Be sure to include the expenses of tools and supplies such as cleaning and polishing products.
And suppose you plan to operate from a business location. In that case, there are additional costs of leased space and water reclamation systems. As a result, you may need a bank loan or business financing.
Get Insurance Coverage
A car detailing business has many potential hazards such as chemical exposure, slips and falls, and injuries on equipment. Be sure you have adequate business and liability insurance to protect your business and yourself.
General Liability Insurance
This insurance protects you from negligence and third-party claims. For example, an employee damages the finish on a car. Or, a passerby slips and falls on soap residue from your cleaning operations.
Garage Keeper's Liability Insurance
This insurance covers any damage or liability to your customer's car while it is in your care. So, for example, if you damage the vehicle by moving it from one location to another.
Commercial Property Insurance
If you have an on-site location, consider commercial property insurance. This insurance covers your building from damage due to fire and vandalism. It will also cover the theft of tools and equipment.
If you have a mobile auto detailing business, commercial property insurance does not apply. However, you can get inland marine property insurance to protect your tools and equipment from theft.
Worker's Compensation Insurance
If you have employees, you provide worker's compensation insurance if an employee has a job injury.
Talk to experienced insurance agents about what insurance is right for your business. Then, compare quotes and coverage for the best deal.
You may or may not need employees in your business. If you need staff to help with your business, decide if they will be employees or independent contractors. If you have employees, you provide employee benefits, deduct employment taxes, and provide worker's compensation.
If you hire independent contractors, you don't have to provide benefits. However, there are tests whether you have an employee or independent contractor.
Advertising and Marketing
Getting the word out about your automotive detailing business is critical to your success. First, however, know the laws when advertising and marketing your business. For example, you can't make false or misleading claims.
Think of creative ways to reach new customers and keep your customers coming back. A few ideas:
- Set up a website where people can view your services and fees and book appointments.
- Get Google My Business and Yelp listings.
- Ask customers to leave positive reviews on your services and recommend you to others.
- Show "before and after" photos of cars on social media like Facebook or Instagram.
- Use email or text to remind past clients to book another appointment or offer deals.
- Partner with auto dealerships, parking garages, or hotels to provide car cleaning services for their customers.
We Can Help You Form Your Car Detailing Business
Opening a car detailing business is a great way to make money and enjoy your love of cars. Although it is easy to start your business, you need to know specific business and legal considerations to protect yourself and your business. Consider speaking with a small business attorney that can expand your knowledge and offer guidance where necessary.
Then, use our simple DIY business formation process to ensure you meet all the legal requirements in your state.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.