Ever wondered about the steps and considerations behind opening a successful funeral home? Learn how you can start, run, and grow your funeral home business successfully.
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Thinking about how to start a funeral home? With an initial investment between $150,000 and $500,000, and potential profit margins of 10% to 30%, the funeral home industry can be a rewarding venture for those prepared for its unique demands.
This guide will walk you through the intricacies of the funeral industry itself, from financial considerations to the essential skills and challenges in the field. Find out what it takes to run a profitable funeral home and determine if it’s the right business for you.
Starting a funeral home, like starting any new business, is a detailed process. Although specific procedures might differ slightly across states, the foundation of the journey is largely similar. Let’s walk through these essential steps.
Research your local customers and competitors. Before making any commitments, it’s pivotal to gain an in-depth understanding of your local target market with marketing research. Begin by identifying your target audience. This involves discerning the demographics, cultural leanings, and preferences of the families you aim to serve. Understanding your clientele is a cornerstone of tailoring your services to match their needs.
Moreover, surveying your local competition is equally vital. Find out what other local funeral homes offer. Are there services they lack? Do they cater to specific religious or cultural groups? By spotting gaps in services and understanding what they offer, you can carve a niche for your own funeral home and differentiate your offerings.
Write your business plan. A robust business plan not only guides your startup phase but also charts the course for your venture’s growth. It should encompass all elements of your enterprise, from funding to setting realistic financial projections (see definition). You should also describe whether you’ll form a funeral home LLC or other structure (more on this later).
Detailing your financing considerations is especially crucial, as they shape how you’ll source initial capital and keep operations running. Setting achievable short-term and long-term goals will also help ensure you have markers to gauge your progress and recalibrate your strategies when necessary.
Ensure you meet all legal requirements for a funeral home. Legal compliance is extremely important for a funeral home. There are three primary areas to address: choosing a business structure, obtaining licenses and permits, and understanding rules enacted by the Federal Trade Commission.
Compliance with legal requisites is non-negotiable for funeral home businesses. The first consideration is deciding on a business structure. A sole proprietorship is straightforward but comes with personal liability. Partnerships split this liability among partners (see partnerships definition). Neither of these informal business entities requires registration with the state.For more information please see: What is a Sole Proprietorship?
A limited liability company (LLC) strikes a balance by offering protection from personal liabilities and tax advantages. On the other hand, corporation definition are more complex structures that also offer personal liability protection. They might offer additional benefits (like the ability to issue stock) depending on the size and scale of your funeral home business. Both LLCs and corporations require registration with the state.
If you’re not sure which business entity is the right choice for your funeral home, we recommend consulting with a local business attorney. Learn more about forming an LLC below.
Licensing is the next step, and it goes beyond obtaining a general business license (which many funeral home businesses won’t need). The funeral home industry has particular licenses for operation, and these might include mortuary science licenses, embalming licenses, permits for cremation services, and others depending on your state’s zoning laws and regulations. Additionally, most states mandate that funeral home directors or embalmers be licensed, which entails formal education and apprenticeships.
Licensure can feel a bit complicated. But if you’re feeling overwhelmed, don’t worry — our business license report service can help. We’ll do the research for you and give you a list of the licenses you need for your unique business.
Last but not least, understanding the Federal Trade Commission (FTC) Funeral Rule is non-negotiable. It helps ensure transparency and fairness in the funeral business, protecting consumers during vulnerable times. This rule mandates that funeral homes provide detailed price lists for their services, among other stipulations. Be sure to carefully understand and adhere to those regulations.
Pick your business location. Selecting a location is about more than just finding available real estate. You need to factor in the demographics of the location, its accessibility, and the presence of other funeral homes in the vicinity. Additionally, your facility’s design and layout play crucial roles in offering a serene environment for grieving families. Whether you decide to lease or purchase a property, ensure it aligns with your brand vision and accommodates your services seamlessly.
Get funding for your funeral home. A solid financial foundation is the bedrock of any successful enterprise. Start by establishing a dedicated business bank account to keep your personal and business finances separate. Sourcing funds can be an intricate process, and it’s worth exploring a mix of loans, grants, and self-funding. Remember, the financial landscape is vast, and there’s an array of options tailored to different business needs. (See loans definition)
Exploring different avenues for funding comes with advantages and challenges. Loans are a common way to secure large amounts of capital. They often have predictable monthly payments and, if secured from a reputable institution, can come with low interest rates. However, loans also mean debt and paying back more than you borrowed due to interest.
On the other hand, grants can essentially be “free money” — funds you don’t need to pay back. They can be obtained from government programs like the Small Business Administration (SBA), nonprofits, and private institutions. However, securing a grant is highly competitive and often requires meeting specific criteria. Self-funding, or bootstrapping, ensures full control over your business, free from external pressures or the stress of debts. Yet, it also means a more significant personal financial risk and potentially slower growth if your own funds are limited.
When you start out, there’s plenty of equipment to buy and expenses to budget for, so be sure to carefully evaluate which funding source is right for you.
Assemble a team of professionals to help. Once the foundations are laid, it’s time to build your team. Begin by obtaining an employer identification number (EIN), as that’s required for corporations, partnerships, and multi-member LLCs, as well as any business that wants to hire employees. With that in place, your employee hiring focus should shift to recruiting skilled professionals who resonate with your funeral home’s values and goals. Beyond credentials and experience, it’s essential to foster a culture of continuous learning and training, helping keep your team at the forefront of industry standards.
Promote your funeral business. A solid marketing plan doesn’t have to be extremely complicated. In today’s digital age, an online presence is not just optional but essential. Building a robust brand identity, having an intuitive funeral home website, and optimizing it for search engines can set you apart. Engage on social media platforms, not just for promotion but also for connecting with your community. Offline, consider collaborations with community events, churches, or other local organizations for outreach.
In an industry as sensitive as funeral services, going the extra mile can mean the world to grieving families. By offering additional services, you don’t just broaden your revenue streams — you also enhance the experience for your clients. One significant avenue worth considering is pre-arranged funeral plans.
These plans allow individuals to pay for and plan their services in advance, providing peace of mind for both themselves and their families. They relieve families from the burden of making decisions during an emotionally charged time. Moreover, offering such plans can lead to more predictable cash flows for your funeral home and help foster deeper relationships with clients.
Another invaluable service is grief counseling. Grieving is a complex process, and many people struggle with the emotional aftermath of a loved one’s passing. By incorporating grief counseling services into your funeral home’s offerings, you’re giving families a safe space to navigate their emotions.
If hiring a full-time, in-house grief counselor isn’t feasible, consider partnering with local therapists or counselors who can be on-call or conduct scheduled sessions. This collaborative approach not only positions your funeral home as a comprehensive service provider but also establishes stronger ties within the community, promoting trust and reliability.
In a digitally driven era, embracing modern technologies can significantly propel the growth of your funeral home. Consider integrating funeral management software to streamline operations, manage bookings, and maintain records. Such software can simplify day-to-day administrative tasks, giving you more time to focus on clients. Additionally, offering digital services like streaming funeral services can cater to distant family members and friends who can’t attend in person, making your services more accessible and modern.
Engaging in continuous learning and industry participation is equally crucial. Regularly attending industry seminars and workshops keeps you abreast of the latest trends, helping ensure your funeral home remains relevant and progressive. Membership in funeral home associations can offer a wealth of resources, from networking opportunities to knowledge sharing. Moreover, being active in such associations often signals to clients that your business is committed to upholding industry standards, fostering trust and cementing your place as a leading service provider in the community.
LLCs are formal legal entities that are typically taxed similarly to sole proprietorships and general partnerships in that the owners include any company profits or losses into their personal returns — the LLC itself does not owe income taxes. An LLC may also elect to be taxed like a corporation, although this is not a very common option.
There are similarities to corporations too, especially when it comes to financial responsibilities. In an LLC, the owners or members are not usually personally accountable for the financial status of the business. This means that if someone sues your LLC, your personal assets are generally not at risk. For more information, see our LLC definition page.
The top reason to form an LLC for your funeral home business is to gain access to the personal asset protection provided by this business structure. Whether your funeral home is a simple operation at a small cemetery or a major service provider with advanced services and hundreds of available plots, you need the limited liability protections that an LLC can provide.
As an example, let’s say that a guest slips on a wet spot on your funeral home’s floor during a service, falls over, and injures themselves. If you operate your funeral home as a sole proprietorship or general partnership, your personal assets — like your house, car, personal bank accounts, etc. — would be at risk if that individual decides to sue your business.
On the other hand, if you form an LLC for your funeral home, and you operate and maintain that LLC in a compliant fashion, the scope of your customer’s lawsuit will be limited to your business assets. In other words, your personal assets will be protected by the business structure you’ve chosen.
However, this is just the tip of the iceberg when it comes to the advantages of the LLC for cemetery and funeral services. Another important aspect is taxation. The LLC actually provides its owners with a selection of options regarding how they want the business to be taxed, which can save you a considerable amount of money compared to simply operating as an informal business entity.
Your funeral home LLC can be taxed as a sole proprietorship (for single-member LLCs) or general partnership (for multi-member LLCs), which is the default option. With this tax structure, your funeral home itself does not pay taxes, but rather the profits are passed through the business entity and your owners pay taxes on that money when they file their own personal taxes.
You can also choose for your cemetery and funeral services to be taxed as a C corporation, although this option isn’t very popular because it subjects your business to what’s known as double taxation — meaning that your profits are taxed first on the corporate level and again on the personal level when they’re distributed to your owners.
The other option is S corporation taxation. There are quite a few limitations to electing S corp taxation, but most cemetery and funeral businesses have no trouble meeting these requirements — your business cannot have more than 100 owners, they all must be either residents or citizens of the United States, etc.
S corp taxation can help your funeral home save money by reducing your self-employment tax burden. Instead of paying self-employment taxes (a 15.3% tax that includes the employer and employee portions of Medicare and Social Security) on all of your business income, you can pay yourself and your co-owners a reasonable salary for your roles and only pay self-employment tax on that portion of your income, while you can reinvest the rest of it into your business without paying this tax.
Compared to operating a sole proprietorship or general partnership funeral home business, the S corp taxation model can save you quite a bit of cash that you can use to buy expensive embalming and refrigeration equipment and make other improvements to your business, rather than writing a big check to Uncle Sam.
Finally, an LLC structure can enhance the credibility of your cemetery and funeral service business venture. Informal business entities don’t have exclusive assumed business names and typically operate under the personal name(s) of their owner(s). For instance, if your name is Johnny Smith and you operate a funeral home sole proprietorship, your company’s name is also “Johnny Smith,” which obviously isn’t a great name for a funeral home.
In this scenario, you could register a DBA (doing business as) name to give your business the ability to operate under an assumed business name, but DBAs have no exclusivity regarding their naming rights in many states. This means that if another funeral home wants to use your DBA name as their own, they’re not only allowed to do so, but they can actually register a formal business entity with that name, preventing you from continuing to use your own assumed name.
With an LLC, you not only have the rights to exclusive use of a business name, but you will also have either the phrase “limited liability company” or the letters “LLC” in that business name. This provides your business with a jolt of respectability because customers respect the professionalism displayed by an LLC. Also, they typically feel more comfortable writing checks to a business entity rather than to an individual.
The formation process for LLCs varies depending on which state you’re forming one in, but in general, the process has some universal steps that need to be taken no matter what state your business is located in. If you want a comprehensive overview of all the steps required to form an LLC, check out our complete LLC guide on the topic.
Coming up with the perfect name for your new LLC is an important step. You’ll need to choose a name that represents your company and describes what you do, and you’ll also have to make sure it isn’t already in use by checking your state’s business database.
Your LLC’s registered agent (which can be an individual or a professional service) is responsible for receiving important document deliveries from the state — like service of process, annual report reminders, etc. — and forwarding them to you. The registered agent ensures that the state always has a reliable point of contact for your business.
The form used to create an LLC is usually called the Articles of Organization, although the name can vary (some states call it the Certificate of Formation or something similar). You’ll need to provide the state with some basic information about your business and its owners. In exchange, the state will formally create your LLC.
The Employer Identification Number (EIN) is a federal tax ID number that essentially functions as a Social Security number for a business. The EIN allows your business to hire employees, pay taxes, apply for bank loans, and more. You can easily obtain an EIN from the Internal Revenue Service free of charge.
Most states don’t require operating agreements but every LLC should have one regardless. This is an internal document that outlines several key operational aspects of your LLC. The value of the operating agreement is how it can help prevent ownership disputes down the line by clearly explaining how the LLC will be run.
You will need a business bank account for your LLC, and you’ll probably want a business credit card for work-related expenses as well. It’s also a good idea to use accounting software like QuickBooks or even hire an accountant to handle your bookkeeping for you.
Depending on your state, you may need a general business license to operate your LLC in compliance with state requirements. The industry-specific licensing requirements for funeral homes vary by state. Take a look at this guide from the National Funeral Directors Association for more information about licensing in your state. Don’t forget to check with your state to see if there are franchise or privilege taxes assessed on LLCs, and also see if your municipal and/or county government entities have any further licensing requirements.
Again, these requirements can vary by state, but most states require some sort of regular report to ensure that your LLC’s info is up-to-date in the state’s business database. Some states require reports each year, while others only require them biannually or not at all. No matter what your state requires, you’ll need to stay on top of it to keep your LLC in good standing.
The NFDA’s resource page is divided into seven different categories: compliance and legal, business and technical, operations and management, public and community relations, products and services, online communities, and research. No matter the scope and scale of your cemetery and funeral services, the National Funeral Directors Association has the information you need.
Wilbert’s funeral professionals page has an excellent collection of resources for cemetery and funeral service providers. While Wilbert is best known for its sales of burial vaults and cremation products, the education portion of their website is quite helpful, as it includes stories from funeral professionals, videos and training programs, and industry resources.
The Funeral Service Foundation offers a selection of tools and resources for funeral service professionals. The Foundation is actually the charitable arm of the NFDA, and the news section on their website is a comprehensive collection of articles and blogs about important issues for funeral directors and other cemetery and funeral home employees.
LifeWeb produces tasteful online memorials for the deceased, where friends and family members can share photographs and stories of their loved ones. LifeWeb also offers physical books for any mourners who would rather have a tangible reminder of the departed. LifeWeb is a great complement to a traditional funeral service and guestbook.
The goal of the National Directory of Morticians is to assist funeral professionals with business aspects of the industry, which gives them more time to focus on family care. They also offer information for funeral service providers to work together, providing connections for companies to subcontract portions of the process.
If the idea of opening a funeral home seems daunting, don’t worry. Our LLC formation service and corporation formation service can jumpstart your journey for $0 (plus state fees). We’re here to back you up with the support you need to start on a compliant legal footing. And if you’re looking to establish an online presence, our website builder is right up your alley. We simplify the complexities, allowing you to zero in on your passion — running your funeral home business.
Owning a funeral home can be profitable. While startup costs can be substantial due to the need for specialized facilities and equipment, the steady inevitability of death helps ensure a continuous need for funeral services. By offering a range of services and maintaining strong community ties, funeral home owners can establish a sustainable and profitable business.
In a funeral home, the highest earners are often the directors or owners, especially if they manage multiple branches or offer an array of specialized services. Their role involves overseeing operations, working with families, and ensuring the quality of services, which justifies their higher compensation. Additionally, specialized roles, like embalmers or grief counselors, can also command competitive salaries based on their expertise and the demand for their services.
Someone who owns a funeral home is typically referred to as a funeral home owner or funeral home director. The term “funeral director” encompasses both ownership and the responsibility of overseeing the daily operations of a funeral service establishment.
The cost of embalming varies based on factors like location, the experience of the embalmer, and the specific funeral home’s pricing structure. On average, embalming can cost between $500 and $1,000, with some places charging more for additional services or complexities related to the procedure. It’s essential for families to request detailed pricing upfront to understand the full cost.
Funeral homes often have high operational costs, including facility maintenance, specialized equipment, licensing, staff salaries, and inventory (like caskets or urns). The perceived high prices for services are set to cover these overhead costs while ensuring a profit margin. Moreover, funeral services are specialized and require skilled professionals, adding to the value and cost of the service. Additionally, given the sensitive nature of the services, families often prioritize quality and trustworthiness from their funeral directors, which can command premium pricing and a steady cash flow. See cash flow definition.
Every funeral home should have business insurance. Given the sensitive nature of the services and the potential for unforeseen events or accidents, having insurance coverage is essential. Business insurance for a funeral home not only covers potential damages to property or equipment but also protects against liabilities, such as if a family member were to get injured on the premises. Additionally, given the emotional weight of funeral services, having insurance can also shield against potential professional liability claims, helping ensure that the business can operate without facing devastating financial setbacks.
To become a funeral director or embalmer in most states, an individual needs to pursue a degree in mortuary science from an accredited institution. This program typically covers topics like grief counseling, business management, and the sciences relevant to embalming. After completing their education, aspiring funeral directors and embalmers must also pass a state licensure exam and often undergo a period of apprenticeship to gain hands-on experience.
Navigating religious or cultural funeral customs requires sensitivity and an open-minded approach. It’s essential to actively communicate with families and community leaders to understand their traditions and preferences for their funeral services. Furthermore, investing in cultural competence training can provide funeral home staff with insights into different customs and practices. It’s also beneficial to maintain a library of resources or contacts that can be consulted when faced with unfamiliar funeral traditions.
The demand for eco-friendly funeral options has been on the rise, reflecting a broader societal shift toward environmental consciousness. Green burials, for instance, avoid traditional embalming chemicals and use biodegradable caskets to minimize environmental impact. Additionally, funeral homes can offer eco-friendly urns made from sustainable materials. Collaborating with green burial grounds or cemeteries and staying informed about eco-friendly practices can help funeral homes meet this growing demand.
What liability risks do funeral homes face?
There are quite a few potential liability issues for funeral homes. First off, your funeral home is subject to slip-and-fall accidents, as is the case with any brick-and-mortar business.
In addition, funeral home negligence can result in some serious lawsuits if you intentionally or unintentionally improperly embalm or store a body, commingle ashes, and more. In other words, you should never operate a funeral home as an informal business entity — you need personal asset protection.
Why should I form an LLC instead of a corporation?
Everyone’s situation is different, and we are not here to provide legal advice. That said, the limited liability company has some concrete advantages over the corporation that makes it the preferred option for most small businesses.
Corporations tend to have more complex formation and maintenance requirements, and they don’t have the taxation advantages of an LLC. The corporation has some advantages of its own (for example, it’s easier to attract investors to a corporation) that make it worth a look but the LLC is a simpler and more flexible business structure.
Can I serve as my LLC’s registered agent?
You certainly can! Every state allows entrepreneurs to serve as their own registered agents. However, while the role of the registered agent can seem like that of an unnecessary middleman, there is more complexity to this position than some people realize.
For instance, you would need to be present and available at your business location during all standard business hours. In addition, if you serve as your LLC’s registered agent, you may need to make your home address a matter of public record. Not only does this have privacy concerns, but there’s also the matter of unwanted junk mail as well.
Why should I hire an LLC service when I can form my own LLC?
The do-it-yourself route is always an option for LLC formation. However, LLC services are so affordable that there’s really no good reason not to use one these days. In addition, some of these companies often throw in free bonus features that make them an even better bargain.
Need some additional information, check out our ZenBusiness vs LegalZoom page.
Should I form my LLC in my home state, or choose a state like Delaware or Wyoming?
Some people like to form their LLCs in states with favorable legal settings. For instance, Delaware is often seen as the most business-friendly state, as it has an entire court system that’s dedicated solely to business matters. As for Wyoming, this state has some of the most generous anonymity laws for LLC ownership.
However, for most people, your best option is to simply form your business in your home state. Forming in a different state can be a tremendous hassle, and it can add some unnecessary complexity to tax issues as well.
How much does it cost to form an LLC?
The costs of LLC formation can vary quite a bit depending on which state you’re forming one in. For in-depth information about LLC formation costs in your specific state, take a look at our state fees guide for state-by-state expenses.
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Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Written by Team ZenBusiness
ZenBusiness has helped people start, run, and grow over 700,000 dream companies. The editorial team at ZenBusiness has over 20 years of collective small business publishing experience and is composed of business formation experts who are dedicated to empowering and educating entrepreneurs about owning a company.
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