The Essentials: Forming a Handyman Business

Do you need a contractor license to be a handyman?

It depends entirely on the state, and often on the job. California allows unlicensed work only on projects under $1,000 in labor and materials combined (raised from $500 in 2024), with no permit required and no employees, and a licensed contractor needs a $25,000 bond. Arizona and Nevada also use $1,000 as a limit. Some states, including Texas, do not issue a general contractor license but require state licenses for plumbing, electrical, and HVAC. Every state excludes or restricts electrical, plumbing beyond simple fixture swaps, gas, HVAC, roofing, and structural work regardless of price. Call your state licensing board and read the exact statute before you advertise a service menu.

Should you form an LLC or stay a sole proprietor?

Because you work in other people's homes, most handymen choose an LLC. Filing fees range from about $50 to $500 depending on the state, with some states adding annual fees (California charges an $800 minimum franchise tax, for example). An LLC separates business debts and claims from your personal assets, though not from your own negligence, and it is not a substitute for insurance. Get an EIN from the IRS (free), open a business bank account, and keep the LLC's money separate. An accountant can advise on the timing of an S-corporation election (IRS Form 2553), which can reduce self-employment tax once net profit exceeds roughly $60,000 to $80,000 but adds payroll and filing costs.

What local licenses and registrations apply?

Most cities and counties require a general business license or tax registration, typically $50 to $400 a year. Some require registration for home-improvement or door-to-door solicitation, and a few require a specific home-improvement contractor registration even for small jobs. If you sell parts or charge for materials, check whether your state requires a sales tax permit or charges sales tax on repair labor; rules differ widely. Register a doing-business-as name if you operate under anything other than your legal name.

Which insurance do you need to start?

General liability is the core policy, commonly $400 to $1,200 a year for a solo handyman with $1 million per occurrence and $2 million aggregate limits, and property managers often require exactly those limits. Add a tool floater or inland marine policy, roughly $150 to $400 a year, for theft from your van. Commercial auto is needed if you use a vehicle for business, since personal auto policies often exclude it. Once you hire employees, workers' compensation becomes mandatory in nearly every state.

What federal rules affect handyman work in older homes?

The EPA Renovation, Repair and Painting (RRP) Rule applies to paid work that disturbs more than 6 square feet of painted surface inside, or 20 square feet outside, in housing built before 1978. It requires a certified firm (about a $300 EPA fee, valid for five years) and a certified renovator trained through an 8-hour course. Skipping it exposes you to serious EPA penalties, so many handymen either get certified or avoid those tasks.

What paperwork should you have ready before the first job?

Prepare four documents before you take a paying client: a one-page service agreement with scope, price, payment terms, and a clause that unlicensed-trade work is excluded; a certificate of insurance you can email on request; a W-9 for commercial clients that pay by check or ACH and may issue a 1099-NEC once payments reach the reporting threshold (raised from $600 to $2,000 for payments made in 2026; income is taxable either way); and a simple invoice template with your legal name, address, license number where required, and a sales tax line if your state taxes repair labor. Keep copies of each signed estimate and invoice for at least three to seven years, since that period covers most tax and contract disputes.

How do you check the rules for your state?

Start with your state contractor licensing board's website and search for the exemption or small-job rule, then read the statute it cites, not a summary on a lead-generation blog. Confirm the dollar limit, whether it includes materials, whether it applies per project or per year, and whether it is lost when a permit is required. Then ask your city or county whether a separate registration is needed. A 20-minute call to each office, with the name of the person you spoke to and the date written down, gives you a record you can point to if a client or inspector questions your scope. Recheck every January, since thresholds change (California's moved from $500 to $1,000 in 2024).

Take this further

FREQUENTLY ASKED QUESTIONS