How to Open a Funeral Home

Step 1: Conduct research and market analysis

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.

Step 2: Create a funeral home business plan

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. 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.

Step 3: Meet legal requirements

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. 

Select a legal structure for your business

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. Neither of these informal business entities requires registration with the state.

A limited liability company (LLC) strikes a balance by offering protection from personal liabilities and tax advantages. On the other hand, corporations 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.

Obtain necessary licenses and permits

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. 

Understand the Federal Trade Commission Funeral Rule

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.

Step 4: Choose a location for your funeral home

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.

Step 5: Fund your funeral business

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.

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.

Step 6: Hire staff

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.

Step 7: Market your funeral services

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.

Offering Additional Services

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.

Growing Your Funeral Home Business

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.

Starting an LLC for Your Funeral Home Business

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.

Benefits of an LLC for a Funeral Home

Personal Asset Protection

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.

Taxation

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.

Sole Proprietorship/General Partnership

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.

C Corporation

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.

S Corporation

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.

Enhanced Credibility and Name Uniqueness

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.

Steps to Start a Funeral Home LLC

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.

1) Choose an LLC name

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.

2) Designate a registered agent

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.

3) File your formation documents with the state

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.

4) Acquire an EIN

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.

5) Create an LLC operating agreement

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.

6) Create a financial infrastructure

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.

7) Handle taxes, licenses, and permits

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.

8) Understand maintenance requirements (annual reports, franchise taxes, etc.)

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.

Additional Resources for Starting a Funeral Home

1) National Funeral Directors Association

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.

2) Wilbert Funeral Services

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.

3) Funeral Service Foundation

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.

4) LifeWeb 360

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.

5) National Directory of Morticians

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.