If you are looking to start a business that’s always in-demand, you might consider becoming a construction contractor.
As a construction contractor, you and your team will be hired to build residential and commercial buildings for clients. You also are building structures such as superhighways, bridges, and more. As a result, you get to oversee the exciting project and be your own boss.
If you decide you’re ready to commit to this profession, here are six steps to get you started on the right footing. Follow this advice to ensure your new company is properly registered and legally compliant.
Step 1: Develop a Business Plan
No planning is planning to fail. You must develop a business plan that informs how your company will open and operate.
Here are some vital points to consider when drafting out your business plan:
- How much will it cost to start your construction contracting business?
- Who are your target customers?
- How much will your services cost?
- What are your overhead expenses?
- Will you focus on one aspect of construction (for example, residential buildings), or will you aim to be known as a jack of all trades?
Answering these questions will get you focused and on the right path towards profitability and sustainability. You’re more likely to plan for any hiccups with a detailed plan of how to deal with filing paperwork, getting a license, and working with clients.
Step 2: Set up a Legal Entity
The next step is to register your business name and form a legal entity. You can either decide to register your business as the following:
- Sole proprietorship
- Limited liability company (LLC), or a corporation.
Make sure you speak to a lawyer to decide which is best for your needs. We recommend setting up an LLC or corporation, as you can’t be personally liable if your business is sued.
Step 3: Secure all necessary Licenses and Permits
Next, find out what licenses and permits you need to operate a construction contractor business in your state. Research the license exams and requirements in your area – for example, Delaware contractor license exams will be different from New York’s, Maryland’s, and other states’.
Failure to get these licenses can lead to severe fines. In extreme cases, the state could shut down your construction contractor business.
Step 4: Apply for an Employer Identification Number (EIN)
If you set up an LLC or corporation, then this is the next logical step. Get it one even if you haven’t hired anyone. Plus, it’s free and easy to get online.
You’ll need your EIN to open a bank account, file for taxes, and apply for licenses. If you plan to run a partnership or sole proprietorship, then the EIN isn’t necessary. However, if you want your business to be taken seriously by large clients, an EIN is a must-have.
Step 5: Register for Taxes
Read up on tax guides for construction businesses, then register for your federal and state taxes. You need to do this before you sign up for your first client. You don’t want the tax authorities breathing down your neck for your tax returns in the first year of business.
Step 6: Finally, Open a Business Bank Account
Don’t use your personal account to run your company. It is essential for proper financial management and asset protection. If your business ever gets sued, your personal assets will be at risk.
Plus, running an account in your business’s name helps you get better lines of credit, interest rates, and more.
Starting a construction contractor business is a profitable path, and you’ll always have business. However, you need to ensure you get off on the right footing.
Remember these six steps and start working on your business plan before submitting any paperwork!