How to Start a Construction Company (And Pick The Best Structure)

If you’re wondering how to start a construction company, this post is for you! Starting a business that specializes in one of the many construction trades (or starting a general contracting business) can be overwhelming. But it doesn’t have to be. We’re here to take some of the confusion out of it, so let’s get going…

Questions to Ask Yourself Before Starting a Business

  1. What are the costs involved? (Specifically, research the costs involved with starting a general contracting business.) Start-up costs? Ongoing expenses? Taxes?
  2. Who is your target market? Homeowners? Business owners? Educators? Government entities? Since you can’t do it all (especially at first), pick one area of construction to focus on that you can do well in.
  3. How will you make money? How much will you charge? What kind of profit margins can you expect? How much do you need to hold back in retained earnings? At the end of the day, if you aren’t making money, you have a construction hobby.
  4. Can you deliver results that people will be happy to pay for? Do you have what it takes to do the job well? Your goal should be to go well beyond having “satisfied customers.” You should do work that is “remarkable”…the kind that makes people into raving fans who are eager to recommend you to their friends. If you’re there, you should have no trouble growing a successful construction company.

    If you can’t do the work at that level yet, consider working for someone for a while to improve your skills and learn the ropes. In the construction trades, it’s actually pretty typical for a beginner to apprentice under someone who has been in the business for a while in order to gain valuable experience before setting out on their own.

What Is the Best Business Entity For Tax Purposes

When you’re just starting out, the small construction company structure you choose can make a big difference down the road. There are several options to consider, and they all have their own tax pros and cons. (We’ve written other articles about each, so just click the links below if you want more details on any of them.)

Sole Proprietor

This is the default business structure for anyone who runs a one-person operation. No forms are needed in order to register. You simply report your earnings on your personal 1040 return at your individual tax rate. Sole proprietors can usually deduct quite a few things related to running their business, including health insurance. The only fees you might face are licenses related to your particular industry. You are fully responsible for any liability if you get sued or are responsible for a work-related accident.

Read our post explaining Sole Proprietorships


When you want a business with multiple owners who share in the profits and losses together, you can form a partnership. There are two kinds: general and limited. With a general partnership, all of the owners are involved in the day-to-day operations of the company (picture building houses alongside your brothers). In a limited partnership, one of the parties usually contributes funding and advice while the other(s) actually do the work.

Partnerships are required to file Form 1065 with the IRS, but the company itself does not pay taxes. Each owner reports their percentage of realized profits on their individual tax returns. Each party is fully liable for the actions of the company as well as the other partners. You’ll want to make sure you have a solid partnership contract in place to cover any issues that may come up, so be sure to have an attorney help you structure the agreement.

Read our post explaining Partnerships


With an LLC, you enjoy the tax benefits of a sole proprietorship or partnership without the unlimited personal liability. If you structure your construction company this way, your personal assets will not be at risk in the event that the business has any financial issues (as long as you can prove that you didn’t act illegally or unethically).

Read our post explaining LLCs


A corporation is a separate entity from the individuals who own it and operate it. It can buy and sell property, sue and be sued. Ownership is usually determined by the distribution or sale of stocks.

There are a couple of ways to further organize an LLC:

  • S Corp – This is a good option for a small business where the owner (or owners…you can have up to 100) want to avoid personal liability as well as double taxation. You can be an employee (drawing a reasonable salary) and an owner (sharing in profits) at the same time.
  • C Corp – This is usually chosen by larger companies who want an unlimited number of owners.

Read our post explaining both types of Corporations

We usually recommend that a contractor choose an LLC or S Corp once they grow beyond working as a solo entrepreneur. But every situation is different, so be sure to schedule a call with one of our business pros to get the best advice for your individual business.

set up a contracting business

How to Set Up a General Contracting Business

Once you’ve realistically thought through the costs and issues related to how to start a construction company, then you’re ready to think about:

  • Opening a business bank account
  • Partnering with an accountant…we can recommend one!
  • Getting business insurance
  • Securing licenses and permits
  • Marketing your business

Nerdwallet has a good article on how to start a construction company that talks about these steps in more detail too.

We get it! There’s a lot to do, and it can be overwhelming. But don’t worry, we can help guide you through all of it!

Different Types of Contractors

There are as many types of construction companies as there are trades within the construction industry. Which one you choose is usually determined by what it is you want to do (or are already good at doing). Here are just a few of the options:

  • General
  • Electrical
  • Plumbing
  • Framing
  • Roofing
  • Drywall
  • Painting
  • Masonry
  • Landscaping

Partner With A Pro Before You Begin

construction accountant

No matter what kind of construction company you choose, the best way to finish well is to begin well. If you want to start a business that will grow and provide you with a good living for many years to come, it’s important that you get started the right way.

CRS CPA has been helping small business owners (lots of them are construction companies) for over 40 years. We go well beyond simply filing taxes once a year, and we believe you should expect more from your CPA.

Give us a call at (731) 668-4482 or schedule a call to let our business experts help guide you through how to start a construction company today!

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