How to Start Your Own Contractor Business
Working as a freelance contractor gives you independence and the freedom to work on small jobs individually or as part of a larger project under a general contractor. You should already have any formal qualifications that you need, and ideally, experience working as whatever contractor type you specialize in beforehand. This experience working for others is crucial and will help you build the right industry connections. It will even give you a great place to start looking for clients.
There are a few things you will need to get handled before you begin your business, so wait until you have these five steps taken care of:
1. Become a Legal Entity
Once you have a name and a general business plan, you will want to become a legal entity. The most common types for contractors such as yourself are the sole proprietorship, partnership, limited liability company (LLC), and corporation. Most contractors prefer to become an LLC, as this protects you from personal liability if you are sued and has minimal LLC state costs.
2. Register for Taxes
Once you are a registered business, you will need to set up your taxes. To do this, you will need an EIN, which is easy and free to do through the IRS website.
3. Set Up Your Financing
There are a few stages of financing you will need to set up:
- Open a business bank account
- Obtain a business credit card
- Create or hire a business accounting solution
You never want to use your personal accounting or bank to fund and manage your business. By operating your business from a dedicated business account, you can benefit from what is known as personal asset protection. If they are not separate, your valuables could be at risk if you are sued.
Another benefit is that you can build up your business credit history, a must for those who need expensive equipment and other items to be purchased on credit or through loans.
4. Earn State and Local Business Licensing
You will need to get all the necessary permits and licenses or else risk operating illegally. Review what you need depending on your business structure (if you have a store or mobile trailer, for example) and wait until everything is green-lit before you start.
5. Get Contractors Insurance that Fits Your Business
You’re almost ready to get started as a contractor, but before you take on any job, you will want to find and invest in the right, comprehensive insurance for contracting business. If you are working on your own, then getting the right contractor’s insurance and adding personal liability insurance is a must. If you hire others, you will need to legally include worker’s compensation insurance.
You can benefit from general liability protection, insure your tools and equipment, cover your commercial vehicle, and so much more. Building the right insurance policy can help you save overall and simplify your expenses. As a bonus, you’ll get a digital certificate you can use to show to clients.
With everything above, you will be ready to start your business. Try to stick to a unique selling point, leverage your existing network, and know you will need to hustle to get more jobs and greater notoriety. It’s slow going, to begin with, but once you reach that hurdle, you can bring in a healthy sum as a business owner.