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How to Set Up a General Contractor Business

Becoming a general contractor can be a very lucrative business for someone with a strong combination of skill and business savvy. Services are usually pretty high in demand on a consistent basis. There are houses to be sold everywhere, and sellers often want to do a bit of remodeling to increase appeal, and hopefully, value. If people are planning on staying put in their home for years to come, there usually comes a time when they want to change things up a bit, or spruce up an outdated and worn-down look. So, if you have the patience, and do things right, you can build up a steady stream of clients.

Being a good contractor does not always translate to successfully running a general contracting business—this adds a whole new element to the work, and you have to think carefully if you have what it takes. If you think you do, here are just a few things to keep in mind to get things off the ground.

Familiarizing Yourself with Requirements for Operation

Like most other businesses, contractors must fulfill certain requirements to legally operate their business. Make sure you have a full understanding of the laws governing your industry, and any required licenses and permits. For example, not only will you need a general business license, you will likely need trade-specific licenses for any work you perform, such as electrical, HVAC or plumbing.  You can use this tool provided by SBA.gov to search for requirements by zip code.

Lining Up the Proper Insurance

Any construction business worth its salt will have all the necessary insurance coverage, and any smart homeowner will check for said insurance before hiring you. Insurance protects your business, your clients, yourself and your assets. At the very least, you will require general liability insurance, property insurance and auto insurance, which offers protection against claims of personal injury and property damage; it will also help cover any resulting legal fees. If you are employing workers directly, some states will require you purchase worker’s compensation, unemployment and state disability insurance.

This can be a complex matter, and it is not one you want to tackle on your own if you are unsure of what is required of you, and would best serve your needs.  Connect with an insurance agent for guidance. Some sites, such as EcontractorsInsurance.com, allow you to get quotes online, and connect with representatives for any questions.

Getting Surety Bonds

Surety bonds are a must for the general contractor if you want to operate your business legally, and is one of the first things people will be searching out on your website, or inquiring upon contacting you. Surety bonds, which are arranged by a third-party, ensure your client will be compensated should you not fulfill the obligations set forth by your contract. Regulations differ depending on the state, so bone up on the requirements, and seek out a reputable bond agent. If you are having trouble getting a bond through a bond agent, the SBA has a program that can help you.

Forming Relationships with Suppliers and Other Professionals

To grow a successful contracting business, you must develop relationships with key groups of people. Open up credit accounts with suppliers, and make sure you pay them on time. Many savvy homeowners not only follow up with past clients, but also reach out to suppliers to get a better idea of your character and professionalism.  Chances are you are going to need subcontractors to handle specific elements of a job—be picky about whom you take on, and do your best to keep the good ones happy. Get in with building inspectors and other professionals who can refer clients to you.

Finding Labor

You must decide how you will handle labor. Depending on the source, you will be subject to different requirements, as far as taxes, insurance requirements and related matters. If you work with subcontractors, make sure you draw up a contract (a lawyer can help with this) and make sure they have proper bonding and insurance. You can use a labor broker to find help, and pay them directly.

These are just a few helpful tips to get you started the path to owning your own contracting business.


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