So, you want to be a junk hauler but you’re not sure about the ‘boring stuff’ regarding licenses and permits? In the United States, junk haulers often need a business license and maybe some other licenses and permits as well, but it all depends on your state, county, and/or city government officials.
The good news is that in some states, no license is required at all. In states where business licenses are required, the process is normally pretty straightforward. When you do need a license, you really should get one in order to be compliant with the law.
Below we’ve put together some general information on junk removal business licenses and permits, as well as some other considerations you’ll want to plan for your junk hauling operation.
Business entities at a glance
The type of legal business entity you intend to operate will play a crucial role in determining how much bureaucracy you can expect to go through. Generally, there are four main business entities to choose from: sole proprietorship, partnership, Limited Liability Company (LLC), and corporation.
From these four business entities, the overwhelming majority of junk haulers in the United States operate as either a sole proprietorship or an LLC. The main differences are:
Sole proprietorship
- Simplicity: a sole proprietorship is normally the easiest and most straightforward way for individuals to start their own small junk hauling business;
- Cost: many states do not require any licenses to operate as a sole proprietor, and those that do generally cost relatively little;
- Liability: sole proprietors are fully and personally liable, e.g. debts, lawsuits, uninsured damage to property, etc. This means that in a lawsuit, for example, individuals can make claims against your personal assets (house, automobile, etc.);
- Taxation: generally, filing taxes as a sole proprietor is a lot easier than under other business formations.
- Ownership: as a sole proprietor, you have full control over the operations of your business.
Limited Liability Company (LLC)
- Simplicity: LLCs tend to be more complex to form, so it’s highly recommended that you consult a lawyer who can form an LLC for you;
- Cost: the cost of forming an LLC can range from around $50 to $500 or more, depending on the state;
- Liability: partners (as designated in the LLC formation) have liability protection in the event of debts, lawsuits, etc. This offers junk haulers much greater protection and leaves their personal assets untouched;
- Taxation: filing taxes as an LLC partner can be fairly complex and you may wish to hire an accountant to assist your business during tax season;
- Ownership: in an LLC, one or more member partners can be appointed as managers and ownership can therefore be much more flexible than under a sole proprietorship.
Which type of business entity is the best for a junk hauling business?
It really depends. For most people that just want to get started with minimal fuss, a sole proprietorship is often better. Junk haulers that have gone down the route of forming an LLC typically want the added liability protection as well as the ability to keep the business going and growing for years to come.
There are other options, too, like partnerships and corporations, that may be appropriate in your circumstances. If you’re unsure, speak to a commercial lawyer that specializes in legal business formation and obtain a professional opinion.
Junk hauler business licenses
Now, the real meat and potatoes of this article is centered around getting a license to haul junk, but do you need one in the first place? It depends. Your state and/or city may require a license to operate a junk removal business (the term ‘waste hauler’ or other similar terms may be used instead).
Since the exact requirements for your circumstances may vary, it is often best to consult your state and city government to see if you need a license to operate your own junk removal business. In most cases, your city government should be the first place to check since many states do not require a general license at all, e.g. Texas and Florida.
If you do need a license, you’ll need to apply and pay for your license as well as take care of renewing it whenever it’s due to expire. Failure to have a business license, where required, can result in costly fines and penalties.
For example, the City & County of Denver, CO requires that all junk haulers apply for a Waste Hauler License to become an officially licensed hauler. Other cities and states may have different requirements, so it’s best to inform yourself and to consider hiring a lawyer specializing in business if you need professional assistance.
Hiring employees to haul junk
If you plan to operate your business alone as a sole proprietor or as a partner in a partnership (e.g. with your spouse or friend) and do not intend to hire any employees, skip this section.
Any business that intends to hire employees must go through extra steps; the first step is to obtain a nine-digit EIN or Employer Identification Number (sometimes also called a FEIN, or Federal Employer Identification Number). You can apply for an EIN for free through the IRS and will need to have one in order to hire any employees.
Keep in mind that this is not the same thing as a state Tax ID number. You may or may not need a state Tax ID number depending on how your business was formed. Also, your EIN is not the same thing as a business license (if you require one). In brief, an EIN is essential for junk hauling businesses that intend to hire other employees and to pay federal taxes.
Do junk removal businesses require an EIN?
Most of the time, small ‘ma and pa’ junk removal businesses do not require an EIN! Sole proprietors and single-member LLC business entities (which is how most junk haulers operate) generally do not require an EIN.
In these cases, your business is identified for tax purposes with your personal Social Security Number (SSN). Still, an EIN can be beneficial for protecting you personally from identity theft, but it is not mandatory unless you hire employees.
Business taxes & accounting
Junk removal businesses must consider their finances, including taxes and accounting, no matter how big or how small the business operations may be. Smaller, independent junk haulers operating as sole proprietors tend to have an easier time with taxes than LLCs or more complex business entities like corporations, so it’s always advisable to consult with a tax accountant and to consider bookkeeping and accounting services.
In terms of licensing and permits, the only ones you will likely require are the EIN, Payroll Tax Registration, and Unemployment and Workers’ Compensation Registration if you are hiring employees. You may also require a Sales Tax Permit, depending on your state.
Junk removal business insurance
Junk removal businesses can encounter all sorts of unexpected events. Sometimes unfortunate accidents resulting in injury, damage to property, or vehicular collisions can all occur, for example. Insurance, even if not always mandatory to have, is a wise investment for any junk hauler.
Since you’ll be spending considerable time on the road in your vehicle, you’ll absolutely need vehicle insurance. Commercial auto insurance is recommended for junk haulers.
Moreover, you may also want to consider general liability insurance. Anything can happen at the property of a customer, so having general liability insurance ensures that you won’t be left paying out of pocket for potential damage. As a sole proprietor (with full liability), we would argue that general liability insurance is a must-have.
Lastly, if you are hiring employees, you should consider workers’ compensation in the event of an injury to one of your employees.
Additional licenses & permits for junk removal
There are many additional licenses and permits that may or may not be required, depending on the nature of your business and where you’re located:
Commercial Driver’s License (CDL)
The first license that is most often required is a Commercial Driver’s License (CDL) in order to operate your junk removal vehicle. If you’re transporting a trailer filled with junk, you’ll most likely need a valid CDL in order to operate legally.
Hazardous Waste License
The next big license that you may require is a hazardous waste collection/removal license/permit. In just about every jurisdiction in the US, hauling hazardous waste such as industrial waste, medical waste, asbestos, paints, solvents, and oil will require additional licensing due to the inherent dangers of handling and disposing of these types of waste. For this reason, most junk haulers avoid hazardous waste altogether.
Occupancy Permit
You should also verify whether or not you may need an occupancy permit for the physical location of your business. Many junk haulers operating independently throughout the US use their personal home address, since the work actually takes place at the property of customers and at landfills and recycling centers and there’s no actual work taking place at the junk hauler’s home.
If you only have one or two pickup trucks with a trailer or two sitting in your driveway and you aren’t actually sorting or storing junk on your property, it’s usually not a big deal and you won’t need an occupancy permit. You may need to apply for a home occupation permit, so check with your city government.
If you operate a fleet of vehicles from your home and have bigger-scale business operations taking place, however, you won’t get away with this so easily. You’ll most likely need to move your business premises to a commercially-zoned property where you are permitted to transport and perhaps store junk en route to a landfill, operate an office for administrative staff, etc.
Street Use Permits
If your junk removal business has trailers and/or dumpsters that you want to rent out to customers for use on their property, you may require a street use permit. Often, dumpsters can be left on the customer’s property and no permit may be required.
In the event that a dumpster or storage container needs to be placed on public right-of-way (e.g. a street) and obstruct the free flow of traffic, you will need to apply for a street use permit. See the City of Minneapolis’ Street Use Permit for an example of how to apply.
You should never leave the task of applying for these permits to your customers. Since you are the owner of the dumpster/trailer, you should always do this on behalf of your customer.
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