How to Start a General Contractor Business

General contractor business laws differ from state to state.

With experience and state licensing, you can start a general contractor business and put your talent and knowledge to work. General contractors provide construction, property improvement and repair services to homes and businesses, and often specialize in one or more disciplines. General contractors plan, manage and oversee projects using employees or sub-contractors. Each state has specific licensing requirements for contracting businesses, but the protocol for starting the business is fairly consistent throughout the country.

Instructions

1. Contact your state's licensing board to inquire about licenses, certifications and insurance requirements for your contracting business and file the necessary forms and fees. You may be required to take a test or produce documentation of past experience or formal education in your contracting discipline.

2. Determine the operating structure of your contracting business: sole proprietor, limited liability company, partnership or corporation and file the applicable forms with your secretary of state.

3. Visit the IRS website and apply for an employer identification number (EIN). Even if you won't hire employees, this number serves as your business' federal tax identification number and is free of charge.

4. File with your state's department of revenue and obtain a tax registration or sales tax number for your contracting business. You will be required to collect sales tax and pay it to the state on applicable product or material sales and some contracting services as required by your state's tax law.

5. Purchase general or contractor's liability and vehicle insurance from your insurance agency. You will also need property insurance and a surety bond. Your insurance agent will provide advice as to the types of contractor's insurance required by your state or recommended by the general contracting industry.

Tips & Warnings

• Not all states require licensing for basic home improvement contractors, so be sure to define the scope of your work and inquire at your state office. You will need to register the business regardless of license requirements.

• When you become licensed many states require you to register your business in a database for public look-up of your contractor license number.

• Never operate a contracting business or perform even small jobs with proper business registration as required by your state. You may be subject to penalties, fines and rest.

• Always obtain business liability insurance to help protect you and your customers against property damage and/or personal injury. Some states require insurance and you could open yourself up to fines and lawsuits.

References

• Entrepreneur: Starting a Business as a Remodeling Contractor
• Business.GOV: How to Become an Independent Contractor
• NOLO: Minimum Requirements for Working as an Independent Contractor
• The Entrepreneur Network: Basic Contracting for New and Start-Up Construction Companies

Resources

• Michie's Legal Resources: Who must be licensed as a contractor?
• CA.gov Contractors Licensing Board
• State of Rhode Island Contractor's Registration and Licensing Board: Residential Contractors
• Business Industry: Top Ten factors in Running a Successful Contractor Business
• IRS: Employer ID Numbers (EINs)