Recommended Advisers for Starting a Construction Business
Starting a construction business is not as simple as loading your tools into your pick-up truck and heading out to find work. If you do not start correctly, your business start-up can end as quickly as it began. The results can even be disastrous. Your business may create liability for you and your family that can end up costing you more money than you originally invested to start the business.
If you do not approach the early process of starting a construction business properly, you will put the business and yourself at risk regardless of how good you are at your trade. It is best to get started in a way that gives you and your business the best chance of success going forward.
When starting a construction business, or any business for that matter, it is recommended that you identify a strong team of advisers for your business. Quality advisers can help you navigate the pitfalls associated with getting a business off of the ground. The following is a list of advisers that can help you get started. Remember that factors including location of your business as well as your specific industry may impact the type of advisers that your business needs.
- Accountants – A solid accountant with knowledge of your specific industry will help guide you through the start-up process. They can help you set-up your financial books as well as coordinate the registration of your company with the IRS and other taxing entities.
Scott Kregel with Kregel and Company, CPA offers a course on basic accounting for contractors for FREE through Construct-Ed – CLICK HERE to review the course syllabus.
- Attorneys – A good attorney will assist you with decisions including the best corporate structure for your business as well as registering your company with the proper state agencies. They can help advise you on how to best limit your liabilities that will occur through the business.
- Insurance Broker/Agent – Every business needs insurance to cover the risks associated with being in business. Insurance agents help business owners decide the type and level of coverage that is best for their unique business.
- Banker – Growing businesses are very rarely financed solely out of the pocket of the business owner. Banking relationships help business owners with starting a construction business by providing much needed capital and credit support for the start-up process.
5 Key Items for Starting a Construction Business
As you get yourself ready for starting a construction business, there are 5 key items that it is recommended you address. The rate of failure for small business start-ups varies depending on the source, but it is estimated that anywhere between 50 and 70% of small businesses fail within the first 18 months. In order to help increase your chances of success when starting a construction business, look at these 5 key items when you establish your business.
- Choose an Entity Type – begin by starting your business using the correct entity type. Options include a sole proprietorship, C-corp, S-corp and an LLC. Choosing the correct corporate structure can help you limit your liabilities. A good accountant or attorney can help advise you when choosing the entity type.
- Get the Correct Licensing – many types of construction businesses require licensing. This is dependent on the state where you are located, the geographic area that you service as well as the type of trade that you are offering. Online resources such as www.contractor-licensing.com provide outstanding resources to determine which states require which specific licensing. Be aware that even if your company is based in a state that does not require licensing, going to another state to work where licensing is required is not permitted unless you have that state’s license.
- Choose the Right Insurance Coverage – every business has some type of risk associated with it. As a result, it is best to get insurance coverage for your business. Some coverage such as Workers Compensation coverage is mandatory in most states with a few exceptions. Working with a licensed insurance broker or agent will help minimize the risks associated with operating your business.
- Secure a Line of Credit – businesses typically work with bankers to develop a line of credit to help streamline the cash flow process. Cash flow is king in most businesses, especially at the start-up stage. Having a line of credit as well as a relationship with a bank can help the business owner smooth out the rough start-up process.
- Collect and Pay Taxes – many business start-ups run into trouble when it comes to taxes. In many states, certain business activities may be subject to taxes including sales tax. In addition, business owners forget to take money out of cash flow to fund their tax liabilities. Working with a qualified tax accountant can help your business avoid these issues.
Starting a construction business can be an exciting time for an entrepreneur. The lure of being your own boss and being able to direct your future can attract you to taking the risk of going out on your own. Owning your own business is part of the American Dream.
The best way to increase your chances of success is to get started correctly right from the beginning. Getting started on the wrong foot will leave you with many problems down the road that will cost a lot more to correct after business has been transacted incorrectly. Get yourself off on the right foot when starting a construction business by following these recommendations and give your business a better chance of succeeding!