Building a Contractor Business

Contractors provide a wide range of services; some choose to specialize in certain industries or markets.

Establishing a contractor business provides entrepreneurs with an opportunity to utilize both construction knowledge and management skills when conducting the venture correctly. It can also prove highly lucrative.

Establishing a separate financial account for your contracting business demonstrates professionalism and makes assessing profits and losses easier.

Licenses and Permits

Many states mandate contractors obtain a license before beginning projects of certain value or scope. Although getting your contractor license can be an extensive process, there are resources that can help guide you through it and fulfill certification requirements in your state.

Application requirements for contractor licenses differ by state, but most states will require you to take and pass a trade or business exam and submit financial statements, proof of insurance coverage and other relevant data. Some may even mandate familiarity with industry best practices, codes and regulations in addition to passing an examination.

Based on your services and location, depending on which state your business is in you may require a business permit to operate legally. For instance, New York requires contractors who contract for home improvement projects with budgets exceeding $500 to obtain one before starting work on them.

Business Structure

Your contractor business’s structure can play an essential role in both legal and financial decisions. For instance, if you plan on working with investors, incorporation would likely meet their requirements more efficiently than any other legal form. A well-developed business plan also makes acquiring funding easier by helping compare loan offers such as interest rates and repayment terms.

Legal entities allow your company to exist as its own separate entity, protecting your personal assets from being used to settle debts or respond to unexpected circumstances. LLCs provide contractors with liability protection, flexible management structures and ownership arrangements, easier compliance requirements than corporations and pass-through taxation for profits and losses that helps avoid double taxation. To create an LLC you will require both an EIN from the IRS as well as an operating agreement outlining how your management structure operates and members’ rights and responsibilities within it; you will also need an operating bank account and financial records maintained for it all.


Marketing is essential to growing any contractor business. From sharing high-resolution photos and videos of completed work to providing helpful information for potential customers, contractors can utilize various techniques to market their services effectively.

Social media can be one of the most effective strategies for marketing your contracting business. Share insightful posts about your services and showcase your work on platforms such as Facebook, Instagram and LinkedIn; this allows you to build an audience, showcase expertise and bring traffic back to your website.

Rent ad space or billboards in high traffic locations to generate leads. Make sure the copy for these ads is engaging to draw in potential customers.

Local SEO (search engine optimization) can also make your contracting business stand out in your community. By setting up a Google My Business page and listing your service area on it as well as managing your online reputation (replying quickly to negative reviews while encouraging positive ones and taking any feedback to enhance it), SEO allows your contractor business to build customer loyalty while expanding and solidifying its position within its industry.


Contractor businesses must purchase insurance to protect themselves against liability, property damage and other risks that might arise during business operations. This usually includes general liability and workers compensation coverage which are both required in many states.

Contractors often require business interruption coverage to protect against lost income, repair expenses and expenses that result from fire or theft. Many small business insurers provide contractor insurance programs which bundle together several important coverages at discounted rates.

As with any small business owner, the cost of contractor insurance varies based on multiple factors, including policy limits and prior claims history. Working with a specialty agent and devising an action plan for managing complex indemnity, additional insured, contractual exposures can help secure adequate coverage at competitive rates. If you employ employees, workers’ compensation will likely also be necessary – in some cases you may also require surety bonds depending on what work is performed by your contractors.