How to Start a Construction Company
Learn the basic steps for getting started running your own business as a residential contractor
If you’ve been working in the trades for a while, perhaps you’re thinking about becoming a general contractor and starting your own construction company. This can be an exciting step to take, and there is a lot to think about and do to get started. Read on to get a sense of some of the key steps.
2. Determine Your Business Structure
There are a variety of ways to set up a new business, including as a sole proprietorship, partnership, corporation, limited liability company or joint venture. You want to register your construction company under the best structure for tax purposes and liability protection. Each structure has certain tax implications, so you would be wise to do some research yourself and perhaps even speak with a business tax accountant to go over the pros and cons of each.
3. Register With the IRS and Your State
All businesses in the U.S. need to have an Employee Identification Number (EIN) logged with the IRS. You’ll want to get this number before registering your business with your state. Typically your state’s Secretary of State website will have information on how to register your business within your state.
Of course, to register your business with the IRS and your state, your business will need to have a name. What will your company be called? It’s a good idea to check with the U.S. Patents and Trademarks Office to be sure you’re not choosing a name that has been trademarked by another business. The U.S. Small Business Administration has helpful information about choosing a name.
There are a variety of ways to set up a new business, including as a sole proprietorship, partnership, corporation, limited liability company or joint venture. You want to register your construction company under the best structure for tax purposes and liability protection. Each structure has certain tax implications, so you would be wise to do some research yourself and perhaps even speak with a business tax accountant to go over the pros and cons of each.
3. Register With the IRS and Your State
All businesses in the U.S. need to have an Employee Identification Number (EIN) logged with the IRS. You’ll want to get this number before registering your business with your state. Typically your state’s Secretary of State website will have information on how to register your business within your state.
Of course, to register your business with the IRS and your state, your business will need to have a name. What will your company be called? It’s a good idea to check with the U.S. Patents and Trademarks Office to be sure you’re not choosing a name that has been trademarked by another business. The U.S. Small Business Administration has helpful information about choosing a name.
4. Get Licensed
Licensing regulations for general contractors vary by state, so you’ll want to be sure you understand the rules in your area. The National Association of State Contractors Licensing Agencies is a good place to start your research. Some states have no licensing requirements for general contractors. Others require that you take and pass an examination and also meet other requirements such as having a certain number of years of experience in the field or filing a contractor’s bond with the state. Again, your state licensing board or local agency can be a good source for what’s required.
5. Get Insurance
Insurance protects your construction company from liability and also protects your employees. Your state may also require that you have general liability insurance, as well as worker’s compensation, unemployment and disability insurance.
Licensing regulations for general contractors vary by state, so you’ll want to be sure you understand the rules in your area. The National Association of State Contractors Licensing Agencies is a good place to start your research. Some states have no licensing requirements for general contractors. Others require that you take and pass an examination and also meet other requirements such as having a certain number of years of experience in the field or filing a contractor’s bond with the state. Again, your state licensing board or local agency can be a good source for what’s required.
5. Get Insurance
Insurance protects your construction company from liability and also protects your employees. Your state may also require that you have general liability insurance, as well as worker’s compensation, unemployment and disability insurance.
6. Secure Financing
If you have sufficient savings, perhaps you will be able to fund your construction company yourself. Otherwise, you might decide to take out a small-business loan. Local banks, credit unions and your city, county or even state can be good sources of information about the options for small-business loans. The USA.gov website also has information about government financing options for your business.
7. Get Accounting and Contracts in Place
You’ll need a way to track your expenses and charge your customers. Spreadsheets can be a good place to start, but as you grow your business you may want a more robust system.
As you gain your first customers, you are also going to need contracts that outline the scope of your work and how you will charge for your services. You may want to enlist the help of an attorney or perhaps get assistance from a local office that supports small business — many cities and counties offer these services.
8. Establish an Online Presence
Homeowners these days do a lot of research before hiring a construction company, and one of the first places they’ll look for information about your company is online. You’ll want to create a profile on Houzz and potentially start a company website. As soon as you have completed projects, have them professionally photographed and upload photos of your work to Houzz so would-be customers can get a sense of what you do.
Getting reviews from successful customers also can help boost your profile as your business develops. Another option is to get reviews from other pros you have worked with in the past who may be able to vouch for your skills before you have a long tenure as a company.
If you’ve read this article and you have any further tips on how to start a construction company, please feel free to share your wisdom in the Comments below!
More on Houzz
How to Stop Wearing Too Many Hats in Your Construction Business
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Browse millions of photos for inspiration
Talk with your peers in the Pro-to-Pro discussions
Join the Houzz Trade Program
If you have sufficient savings, perhaps you will be able to fund your construction company yourself. Otherwise, you might decide to take out a small-business loan. Local banks, credit unions and your city, county or even state can be good sources of information about the options for small-business loans. The USA.gov website also has information about government financing options for your business.
7. Get Accounting and Contracts in Place
You’ll need a way to track your expenses and charge your customers. Spreadsheets can be a good place to start, but as you grow your business you may want a more robust system.
As you gain your first customers, you are also going to need contracts that outline the scope of your work and how you will charge for your services. You may want to enlist the help of an attorney or perhaps get assistance from a local office that supports small business — many cities and counties offer these services.
8. Establish an Online Presence
Homeowners these days do a lot of research before hiring a construction company, and one of the first places they’ll look for information about your company is online. You’ll want to create a profile on Houzz and potentially start a company website. As soon as you have completed projects, have them professionally photographed and upload photos of your work to Houzz so would-be customers can get a sense of what you do.
Getting reviews from successful customers also can help boost your profile as your business develops. Another option is to get reviews from other pros you have worked with in the past who may be able to vouch for your skills before you have a long tenure as a company.
If you’ve read this article and you have any further tips on how to start a construction company, please feel free to share your wisdom in the Comments below!
More on Houzz
How to Stop Wearing Too Many Hats in Your Construction Business
Read more stories for pros
Browse millions of photos for inspiration
Talk with your peers in the Pro-to-Pro discussions
Join the Houzz Trade Program
If you’re wondering how to start a construction company, you might be unsure where to begin. Writing a business plan can be a great entry point to the process for new entrepreneurs.
While it’s easy to skip this step and just try to get started without any real plan, taking the time to write a business plan can be a valuable way to think through your business goals, key challenges you may face and the ways you will become profitable. There are many templates of business plans online that you can review to get a sense of what to include.
In general, you’ll want to consider your competition — meaning other businesses that will be targeting the same clients — as well as your competitive advantages. Writing a business plan involves coming up with a marketing plan, which will force you to think through how you’ll position your services. What is your unique advantage as a business? Will you compete based on price, service or quality of work?
Having a clear message to the consumer can help you down the road as you pitch your firm to potential clients. It’s also something good to have on hand should you decide to apply for a business loan.
While this may sound obvious, you will need to charge your customers for the work you do for them. But how will you do this? Will you charge an hourly rate? If so, what will that rate be? It’s common for contractors to use a contract based either on a fixed price or on time and materials. Which method will you choose?
Another critical part of a business plan is projecting your expenses. Do you need to purchase equipment? Will you spend money on advertising? Will you pay yourself a salary? Will you have employees? Where will you work, and will you rent a space? How much money will you need to make to cover all your costs? Again, the business plan will help you think all this through, which is why it is an endeavor well worth taking the time to do.
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