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How to Open a Funeral Home

Funeral Director Comforts Widow

Opening a funeral home takes hard work, dedicated research, and a passion for this business area. Funeral home operators serve customers who are often facing the most difficult times in their lives. The work can be emotionally taxing, but the feeling of satisfaction that comes from helping clients through dark times is its own reward for many owners.

You likely already know whether the funeral business is right for you. The challenge comes in deciding whether you have the mental and financial wherewithal to open your own funeral home. But with ample amounts of research and preparation, you will be ready to open your own funeral home.

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1. Assess Your Options and Chart a Course

The best thing any potential business owner can do for themselves is to take a beat and survey their options. Look at your finances and determine if you're in the right place to start a business. Discuss your plans with your significant other or family and friends.

By no means is this the time to talk yourself out of following your passion. But it is still an excellent time to consider worst-case scenarios. Don't be afraid to scrutinize your idea before you take the leap.

2. Research and Draft a Business Plan

The work really begins when you start researching your business plan. No matter what industry you're starting a business in, the business plan is often the most exhaustive part of the process. That's because most of the critical decisions you must make for your business are made right here.

This is where you dedicate a significant amount of time to researching all facets of the funeral industry. Survey the broader landscape before zeroing in on the market where you plan to open your funeral home. Most importantly, make a checklist of all the issues your business plan should address. Here are the most pressing questions every plan should answer:

  • Are you purchasing an already-existing funeral home business or starting anew?
  • Will your funeral home lease or buy its location?
  • Are you the sole owner, or will there be multiple owners?
  • Which legal business entity structure will you choose for the business?
  • How do you intend to finance the funeral home's opening?
  • Who are your competitors, and is there a market demand for your services?
  • What services does your funeral home need to provide, and who must you hire to provide them?
  • What are you going to name the funeral home?
  • How will you market your services?

Knowing how to draft your plan can seem daunting. Thankfully, there are business plan templates online that offer substantial guidance.

3. Seek and Secure Financing

Securing financing is always a challenge, but it's easier for businesses that are always in demand. Death is unpleasant, but it's a necessary and constant part of life. A well-run funeral home sets itself up for success with good record keeping, a wise plan, and starting capital.

Funeral homes need to be outfitted with a lot of specialized equipment. This needs to be considered as you put together your company's budget. This equipment includes:

  • Embalming equipment, supplies, and tables
  • Hydraulic lifts capable of lifting human bodies
  • A hearse
  • A cremation chamber
  •  A refrigeration system
  • Caskets both to sell and have on-hand
  • Everyday business items such as computers and a printer

It would be best if you were prepared to contribute up to a quarter of the opening costs from your own personal assets. Business owners with good credit and the available funds should be able to secure a sizeable loan from a bank.

4. Register Your Business as a Legal Entity

This step requires you to register your business with the state so it can be recognized as a legal entity.

The default entity type is a sole proprietorship. As a sole proprietor, you and your business are viewed as a single legal entity. This business structure requires no registration with a state governmental body, though you will still need to register to apply for an Employer Identification Number (EIN). The main drawback to a sole proprietorship is that the owners' personal assets are not protected against the business's debts and obligations.

Most business owners will elect to register their business as either a limited liability company (LLC) or corporation. These structures offer owners both some risk protection and additional tax flexibilities unavailable with sole proprietorships or general partnerships.

Registering your business does involve a fee. You will also be subject to renewal fees each year in most states. These fees are nominal, but it's best to consult your state's governmental business authority to determine costs in your state.

Registering isn't just important. As you'll see in the next two steps, it's a critical obligation if you want to run a professional funeral home.

5. Obtain an EIN Through the IRS

Regardless of the legal entity you choose, the process makes you eligible for an EIN application with the Internal Revenue Service (IRS). If you plan on hiring employees or opening a business bank account, you will need an EIN. These nine-digit numbers are like Social Security Numbers (SSNs) for your business. They are what allows the IRS to recognize the business for tax purposes.

You can apply for EINs online, by mail, over the phone, and by fax. Applying is free of charge.

6. Get a Business Bank Account and Build Credit

EINs are required to open a business bank account. Remember when you registered your company as a separate legal entity from your personal assets? Your business bank account further separates your assets from the assets of the business.

If you've worked through the previous steps, your business could be of interest to lenders. Conducting transactions through a business bank account and maintaining diligent records will be attractive to creditors, including net-30 vendors. Net-30 vendors are creditors that require payment within 30 days of service. Utilize these opportunities to build up great credit for your business.

7. Register for All Applicable Permits and Licenses

Your business will still be subject to the laws and regulations of the state in which it operates. Every state has different requirements, but the main thing here is that you check with the office of your state's business administrator (typically a secretary of state) to determine what's required for your funeral home. No matter which state you're in, make sure you are running a clean and safe workspace.

Your business is also subject to regulation from the Federal Trade Commission (FTC) under what is called the "Funeral Rule." This oversight protects customers from being taken advantage of by shady funeral home dealings.

8. Find a Location for Your Funeral Home

Finding the right location for your funeral home can be costly. You're going to need a lot of space for all your business's necessary equipment. You'll also need a public space that is staged for viewings and a private working area for embalming, cremation, and general preparations.

Your location should take your competitors and the local market into account as well. Where are your competitors located? Where would it be most advantageous to set up shop considering that information? Choose a spot where competitors don't crowd you.

Depending on the state or municipality where you are operating, you might be required to register for a certificate of occupancy (COs). COs merely confirm your location meets all necessary building codes and zoning laws.

9. Obtain Business Insurance

Your funeral home will see a lot of foot traffic when holding visitations, and accidents can happen. You should always make the safety of your visitors a priority, but every business should have insurance, nonetheless.

Every funeral home owner will want to research two unique areas: General liability insurance and, if your business hires employees, workman's compensation insurance.

10. Build a Marketing Strategy and File for a Trademark

Your marketing will likely be the first and best way customers will find out about your funeral home. There is no one right strategy for advertising, but here are some avenues to consider:

  • A website that details your services and contact information
  • TV, radio, and newspaper advertisements
  • Get your phone number and address listed in online and printed directories

As for trademarks, it is never too early to file. As soon as you have conceptualized your business's name and logo, file it with the U.S. Patent and Trademark Office (USPTO). Know that the application process can take up to eighteen months.

11. Hire Employees

Now it's time to hire employees. But what kind of employees will your funeral home need? Answering that question requires you to figure out your involvement as well. Will you be managing the day-to-day affairs of the business? Do you plan on serving as a director? As an embalmer?

Your education and background will determine what kind of help you need, but here's a list of some potential hires to make:

  • Business manager to oversee day-to-day operations
  • A funeral director who coordinates visitations
  • A professionally trained embalmer
  • A driver for the hearse
  • Assistants for the director, manager, and embalmer; if necessary

12. Open Your Funeral Home for Business

The time has now arrived to open your funeral home and provide an essential service to your community. Operate your business professionally and with empathy, and your customers will remember you and look to your business in their time of grief.

Have More Questions? 

Starting your own funeral home is difficult enough without all the added legal and tax considerations. When the questions start piling up and you need answers, consider seeking the services of a dedicated legal professional through FindLaw. Contacting a local small business lawyer is an excellent first step to fostering a successful business enterprise.

And when you are ready to start your business, use our simple DIY business formation process to ensure you meet all the legal requirements in your state.

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