How to Start a General Contractor Business


How to Start a General Contractor Business

Feb 9, 2022 · 5 minutes to read

Consutruction contractor shakes hand in an office with yellow safety helmet to start up a business.

A general contracting firm may be a lucrative venture. If you’re skilled in construction and people management, opening your own business could be a great way to further your career in the industry. The average compensation for a general contractor in the United States is $81,909 according to Indeed, but if you control a successful business, you may earn a lot more.

However, not everyone is suited to owning their own business. To manage your firm, you’ll need to be proficient in a variety of skills, including business planning, filing businedecidingmploying subcontractors, determining how much to charge, obtaining the right business insurance, and marketing your company.

That’s a lot to wrap your head around, especially if you are new to owning a business. To help, here’s a guide for establishing a general contracting firm.

1. Certificates and Licenses

Whether it’s a home improvement project or building a new skyscraper, a general contractor is in charge of all aspects of the building process. You’ll need to know about design, construction procedures, financing, and building codes. General contractors must be licenced in all 50 states, although the specific qualifications required to receive these licenses differs from state to state.

Typically, many years of journeyman experience or a corresponding college degree, such as construction management or civil engineering, are needed to become a licensed general contractor. A state test and a contractor bond may also be a prerequisite. Regulations can change over time, so check with your state to ensure you’re meeting the current requirements.

2. Setup tax and company structure

When launching a general contracting firm, one of the most important considerations is deciding what type of business structure to use. Each structure has its own set of advantages and disadvantages, and the form you pick might have significant tax ramifications and consequences for your company. Before making your final decision, you may want to consult with a tax consultant or attorney.

Small enterprises are most often organised in one of three ways:

  • Sole Proprietorship: If you’ll be the only owner, a sole proprietorship may be the best option. You can either run your firm under your own name or submit a Doing Business As (DBA) form to register a different company name. You won’t require an EIN (employment identification number) from the IRS, and you’ll be able to calculate and submit your company taxes alongside your personal taxes. However, if your firm is sued, you may be held personally accountable for damages.
  • Limited Liability Company (LLC): Small business with two or more proprietors are often formed as an LLC. Profits and losses from your business “carry through” to your personal income tax returns, so there’s no need for additional documentation. Because it is considered a separate entity in the eyes of the law, an LLC can also shield your personal assets if your company is sued.
  • S Corporation: When forming an LLC, you have the choice of becoming an S corporation. This is the most basic form of formation, and it provides certain tax benefits over a standard LLC. It does, however, require additional documentation.

Specific paperwork requirements apply to the above company models. You may also need to obtain a company or occupational licence, as well as fill out other state documents. An attorney who specialises in local start-ups could help you get started, or follow the IRS Checklist for Starting a Business to ensure you file everything correctly.

3. Options for Business Insurance

When you’re starting a general contracting firm, business insurance might not be at the top of your priority list. From making sure your licence and bonds are up to date to completing your starting paperwork, there are many other things to think about. However, skipping insurance could be a costly error. A lot may go wrong when general contractors are in charge of all parts of a building project.

General contractor insurance that is tailored to your specific needs can help protect your growing business from common risks you may encounter in your line of work. There are many types of insurance that you may consider as a general contractor, such as General Liability, commercial auto coverage, and tool coverage. Whether you scuff a customer’s hardwood floor by accident, a client falls over a toolbox, or one of your subcontractors makes a pricey error, knowing you’re covered in the case of a claim or lawsuit gives you peace of mind.

4. Marketing & Business Plan

Many individuals are afraid of business and marketing strategies, but they don’t have to be hard or frightening. Your business plan is nothing more than a road map for getting your business from where it is to where it wants to be.

A business plan typically includes research on your local market, competitors, and target clients. It can also cover your advertising strategy, budgets, and overall business goals. Your business plan can be general when you’re first starting out, with more details added as you get closer to taking on your first client. It should also be updated to reflect changes such as growth or a shift in the services you provide.

Starting a general contractor business takes a lot of planning and effort, but the result may be well worth it. We hope that this business guide helps you build your own company.

Looking for insurance to protect your business? Learn more about insurance for general contractors.


*As with any insurance, coverage will be subject to the terms, conditions and exclusions contained in the policy wording. The information contained in this article is general only.  Coverage for claims on the policy will be determined by the insurer, not BizInsure, and will depend on the specific facts and circumstances involved.

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