How to Start a Construction Contracting Company

Safety is of the utmost importance in the contracting business.

As a construction contractor, you'll work with contractors, subcontractors, local government and various associations. Before you can grow your business and begin to nab larger projects, you'll need to demonstrate that your company has the skills, manpower, equipment and reputation needed to get the job done quickly and efficiently. Build your reputation by legitimizing your business, developing relationships with reliable suppliers and hiring skilled and reliable contractors.

Things You'll Need

• Contractor's license
• Business license
• Business entity
• Skilled and reliable employees
• Commercial space
• Equipment
• Commercial vehicles
• Contract
• Attorney

Instructions

1. Gain experience working as a contractor on both sides of the aisle. In addition to learning the skills required to do the work, such as blueprint reading, construction methods and proper safety. Learn county, state and federal building and safety codes, and gain experience as a supervisor---managing others, bidding on contracts and negotiating contracts.

2. Legitimize your business by incorporating or forming a limited liability company. Generally, an LLC can offer tax advantages that a corporation cannot with the added liability protection. Select a relevant and professional name, and register your business with your secretary of state. Consult with an attorney to help you select the right entity for your business and help you draw up contracts and estimates.

3. Rent commercial space large enough to store leftover materials, vehicles, wood, equipment and an office. A warehouse provides an ideal location, as you will likely need at least 5,000 square feet and an ample parking lot to accommodate your fleet, depending on the size of your equipment and vehicles.

4. Consider renting heavy machinery or rarely used large equipment to reduce costs and maintenance concerns. Only rent new or nearly new equipment, and inspect it prior to renting and document damage as necessary to alleviate any liability. Review manuals as needed; don't ever operate heavy duty equipment if you aren't familiar with how to operate it.

   When viable, open business accounts with hardware stores and reliable distributors to nab lower wholesale prices and faster service and to further establish a relationship with your supplier. However, balance opening a line of credit against whether or not you can get a better deal via a rewards program with your business credit card provider. Outfit all commercial vehicles with the required Department of Transportation decals. Obtain equipment and auto liability insurance.

5. Obtain the required licenses for operating in your region, such as a contractor's license and state license. You may need to obtain liability insurance and a surety bond. Your state licensing department will provide you with the minimum coverage requirements.

6. Hire reliable and skilled contractors and subcontractors, such as architects, plumbers, electricians and landscapers. Ensure that all subcontractors are licensed and bonded and that they have properly trained and covered their employees. While you will likely need to hire an assistant to answer the phones and handle the books, remember that when you hire permanent employees or contractors, you will need to obtain worker's compensation insurance and pay salaries. Understand the financial, legal and tax liability requirements prior to hiring.

7. Make a name for your construction business. Establish solid relationships with your suppliers, local banks and realtors. Join your chamber of commerce and local builder's associations.

Tips & Warnings

• Contact the Small Business Administration for help on developing a solid business plan. (See Resources section.)

• Remain current on the latest building codes or safety regulations.

References

• Federal Trade Commission: What to Look for in a Contractor

Resources

• Contractor's Insurance: What to Know Before Hiring a Subcontractor
• IRS: Taxation Rules for Contractors
• Small Business Administration