Starting a Car Wash

What Are The Best Switches For A Car Wash?

Many owners will debate what are the best switches for a car wash but in my opinion rotary switches are the best even though they are considered old school.  Rotary switches are inexpensive and very reliable while push buttons are expensive and more prone to moisture issues.  Keep it simple and easy for customers to use at your car wash while having reliability.  While not as trendy as the push buttons, rotary switches work and rarely fail. With push buttons there will be trouble with water issues and in the winter with buttons freezing.


Licensing a Car Wash

In many areas, licensing a car wash can be a frustrating experience.  Especially if you are building new, be sure you can get the licensing approved before purchasing the land and materials.

Environmental Licenses

Most car wash facilities are required by law to treat and/or reuse their water and may be required to maintain waste-water discharge permits, in contrast to unregulated facilities or even driveway washing where waste-water can end up in the storm drain and, eventually, in streams, rivers and lakes. Additionally car washes, like many other businesses will require a license from the city, county, state.  Seek information from your local City Hall or County Clerk’s office to be sure.

Business Licenses

A state business license is the main document required for tax purposes and conducting other basic business functions. Many states have established small business assistance agencies to help small businesses comply with state requirements.  Seek information from your local City Hall or County Clerk’s office to be sure.

Check out StartingYourBusiness.com for a list of business licenses and departments for each state.

Tax Registration

If the state in which you operate has a state income tax, you’ll have to register and obtain an employer identification number from your state Department of Revenue or Treasury Department.

Trade Name Registration

If your business will only be operated in your local community, registering your company name with the state may be sufficient. This will not protect your name from anyone else using it. It just creates a paper trail of who is doing business under a certain name. Check with your County Clerk’s office.  A resource to help get your DBA is here.

Employer Registrations

If you have any employees, you’ll probably be required to make unemployment insurance contributions for your staffing business. For more information, contact your state Department of Revenue or Department of Labor.

 

 


Designing A New Car Wash

If you are starting new and designing a new car wash, my best advice is to first visit other washes and see what you like vs. don’t like.  If you go to areas where you won’t be competition, most owners will be more than happy to talk with you provided you do it on their time when they aren’t busy.  Another place to start is the equipment supplier. The potential supplier should be able to direct you to, or obtain for you, all the necessary resources to locate, design, build, and market your car wash project. After all, that is what they do.  The equipment supplier will have experience with what services sell best in which areas and how to lay out your facility for maximum appeal. You should choose a supplier with demonstrated capability to service and support your business after completion and well into the future.


How Long Does It Take To Construct A Car Wash

I’ve been asked many times, how long does it take to construct a car wash.  The time to build a car wash will vary depending on how well organized you are, the size of the project and location of the project. Expect to spend 6-8 months in permit and design phase and another 4-6 months to completion.  Weather and labor availability tend to present the biggest hurdles.  Look to your equipment supplier for recommendations on experienced project manager and/or construction firms to minimize headaches during this period.  If you ask some of the car wash distributors for site evaluation forms they will readily give them to you. Keep in mind that they will tend to be over optimistic in their projections but you can use them to analyze individual locations and compare them to each other. Check their websites as many of them have them online worksheets available.

Especially with the first project many things come up that an inexperienced operator may pay too much for because you won’t know better.  A lot of guys will tend to focus on one aspect of the construction they feel is really important but tends to matter very little so they over spend money and time.  A great resource for the new and experienced is attending the International Carwash Association (ICA) workshops that are being given at the various regional trade shows throughout the U.S.


Car Wash Business Structures

Starting your car wash will require a business structure choice.  The business structure is basically how the business is organized and whether it is held personally or as a separate legal entity.  Each one has it’s own strengths and weakness.  Which car wash business structure is best for you?

Sole Proprietorship

The sole proprietorship is a simple, informal structure that is inexpensive to form; it is usually owned by a single person or a marital community. The sole proprietorship is typically used for a business structure as it is easy to form and inexpensive. The owner operates the business, is personally liable for all business debts, can freely transfer all or part of the business, and can report profit or loss on personal income tax returns. This structure is risky if you have employees or a lot of personal assets.

General Partnership

Partnerships are inexpensive to form; they require an agreement between two or more individuals or entities to jointly own and operate a business. Profit, loss, and managerial duties are shared among the partners, and each partner is personally liable for partnership debts. Partnerships do not pay taxes, but must file an informational return; individual partners report their share of profits and losses on their personal return. Short-term partnerships are also known as joint ventures.

C Corporation (Inc. or Ltd.) 

This is a complex business structure with more startup costs than sole proprietors and partnerships. A corporation is a legal entity separate from its owners, who own shares of stock in the company. Corporations can be created for profit or nonprofit purposes and may be subject to increased licensing fees and government regulation than other structures. Profits are taxed both at the corporate level and again when distributed to shareholders.

Shareholders are not personally liable for corporate obligations unless corporate formalities have not been observed; such formalities provide evidence that the corporation is a separate legal entity from its shareholders. Failure to do so may open the shareholders to liability of the corporation’s debts. Corporate formalities include:

  • Issuing stock certificates
  • Holding annual meetings
  • Recording the minutes of the meetings
  • Electing directors or ratifying the status of existing directors

While there are lots of books and information on the internet, corporations should always be assisted by a qualified attorney.  If you don’t follow all the steps and procedures you are at risk of losing your liability protection and that’s why you want a corporation


Sub Chapter S Corporation (Inc. or Ltd.) 

This structure is identical to the C Corporation in many ways, but offers avoidance of double taxation. If a corporation qualifies for S status with the IRS, it is taxed like a partnership; the corporation is not taxed, but the income flows through to shareholders who report the income on their individual returns.

Limited Liability Company (LLC)

The LLC is generally considered advantageous because it combines the limited personal liability feature of a corporation with the tax advantages of a partnership and sole proprietorship. Profits and losses can be passed through the company to its members or the LLC can elect to be taxed like a corporation. LLCs do not have stock and are not required to observe corporate formalities. Owners are called members, and the LLC is managed by these members or by appointed managers.  Each state will have it’s own set of LLC statutes so be sure to review them against the corporation to see which one is best for you.

 

Keep in mind that all of the different car wash business structures have their individual pros and cons.  Regardless of which one you choose, you get to write off all of your expenses (just like a sole proprietorship or partnership) and are not likely to save any more money on taxes by choosing one over the other. (There are occasions but not typically until you are making mid six-figures).  While there is a lot of information on the internet, be sure to get legal review to be sure everything is in place.