Starting a construction company may be a good business idea; however, it is of utmost importance that you have the right business structure in place.
One reason construction businesses prefer to form an LLC is that it is easy to form, tax efficient, and limits the owners’ liability.
So here is an elaborate procedure for registering an LLC for a Construction Company.
1. Choose a Name for Your LLC
✅ Make it distinguishable: The name of the limited liability company mustn’t match the name of an LLC that is already in existence within the boundary limits of your state and is registered. This is to prevent legal battles or issues of confusion with consumers in the future.
✅ Use the Words LLC: You may register your limited liability company as a business entity that uses the words “LLC”, or “L.L.C.” or “Limited Liability Company”. This identifies such business entities to the public that the owners of such businesses are protected from liability.
✅ Check Domain Availability: You will also need to pick a website domain that is identical to your company’s name since a website is integral in the current era. Even if you do not launch the website for your company don’t hesitate to get a domain that reflects your company better. Consistency in the brand name on different platforms increases credibility and recognition.
2. Pick a Registered Agent
An LLC registration agent is any permitted entity or an individual that will be receiving any legal instruments like a government notice or a lawsuit for your LLC. The registered agent must also maintain a physical office in the state in which the LLC is incorporated.
Even so, limitations exist, and for such circumstances, you either take charge of being your registered agent or outsource the agent services to professionals. Registered agent services are beneficial since they also provide other services including anonymity as well as agent reminders on some filing due dates.
3. Submit Articles of Organization
✅ Gather Required Information: The Articles of Organization, which may also be referred to as Certificate of Formation in certain regions, is the main document prepared to register your LLC. It usually contains details such as the proposed name of the LLC, the registered agent’s contact details, business location, and sometimes, the member’s or managers’ particulars.
✅ Submit to the State: Dispatch the Articles of Organization to your region’s Secretary of State, which may be done through an online platform, via mail, or in person. Each state has its filing fee, ranging between $50 to $500. Review the expected timeframes for completion, which range from several days to weeks, depending on the filing requirements of your state.
4. Draft the Operating Agreement
Not applicable in every state, but creates an operating agreement because it details the LLC’s ownership structure, members’ roles, and procedures to be followed during operations. This document also helps in reducing conflicts by making expectations clear to the members.
Key Components:
- Ownership percentages and capital contributions of each member.
- Roles and responsibilities of members and managers.
- Distribution of profits and losses.
- Admission of new members or removal of existing ones.
- Processes for achieving dissolution of the LLC in cases where it becomes imperative to do so.
As far as the development of operating agreements is concerned, it is a more crucial document in the construction business since there is always a risk of being in partnerships and making huge investments.
5. Apply for EIN (Employer Identification Number)
EIN stands for Employer identification number and it is a number for tax purposes. The IRS gives this number and it is essential for making new hires, filing tax returns, or opening a business checking account.
You can get EIN online at no charge at the IRS website. This is very simple and it doesn’t take long. Set aside five minutes or less for this task. Just make sure you provide relevant and correct details to avoid any possible delays.
6. Secure the Required Licenses and Certifications
There are licenses and specific international construction permits that a construction company should have to use viable construction tools and machinery. A good example of these licenses and permits are:
✅ Contractor License by the State: The need for a certificate varies from state to state and it may require passing a test, to present proof of experience and finances.
✅ Business License from a Local Government Agency: Whether a person lives in a county or a city it is essential to contact the government in the area and check out the local laws such as zoning or fire safety inspection.
✅ Zoning Identification Permits: If your business is being set up in a specific location, such a permit is essential to ensure that the local zoning laws governing the establishment of offices/storage of equipment are met.
✅ Construction Environmental Clearance: It is equally important to note that for example if a construction activity is planned next to a wetland or any protected area, such a clearance is a part of per-built construction.
The acquisition of the needed permits will lessen the chances of getting penalized for not adhering to certain construction rules or even the chances of getting a legal suit.
7. Open a Business Bank Account
It is essential to create a clone of your private property while also offering yourself liability protection as well as an accounting ease solution by creating a separate account for your business only. Also, this step makes it even easier to do business as it builds credibility with clients as well as suppliers.
✅ How to Create an Account: An account may be created with an enabling EIN or organization articles, as well as an enabling premier operating contract.
A person may also compare and contrast different banks and the accounts they offer to get accounts with the best features at low fees or technology like online banking.
Think about starting a business credit card to handle costs and at the same time create a business credit history for your company.
8. Acquire Business Insurance
There are certain risks construction businesses are exposed to including damage to physical property, work injuries, and even delays in the completion of projects. Without proper insurance coverage, the members of the LLC are exposed and also the business is unable to meet the legal requirements of the state.
Prepare Suitable Insurance Coverage Options:
✅ General Liability Insurance: This takes care of third-party allegations of hurting someone or damaging property by a certain company.
✅ Workers Compensation Insurance: This insurance is mandatory in the majority of states for employers who have workers besides covering any medical fees and loss of income resulting from the work done.
✅ Professional Liability Insurance: This insurance, for professional services, protects people from allegations of mistakes or even carelessness.
✅ Commercial Auto Insurance: Any vehicles that are used for business activities that include transportation of goods and or items to a particular business are insured through this policy.
✅ Builder’s Risk Insurance: This type of insurance covers any building that is under construction as well as the materials that may be used.
9. Comply with Tax Requirements
Being aware of and ensuring that you meet all tax requirements is important to avoid being fined. Taxation for construction businesses may include:
✅ State and Local Taxes: These can be taxes on sales and materials used, taxes on the income generated, and the tax on the usage of the items.
✅ Employment Taxes: Employers are accountable for deducting and paying payroll taxes if they hire employees.
✅ Self-Employment Taxes: The profits earned by the members of the LLC are subject to Social Security and Medicare taxes.
Always consult with a tax specialist to ensure proper filing and take any legal deductions that tax allows such as equipment purchase, vehicle expenditure, and home office expenses.
Conclusion
Starting an LLC as a construction company is a good idea regarding the security of your assets since it also facilitates business formality. If some detailed steps of forming the construction company are followed in addition to meeting all the legal and regulatory necessities, then for years to come, one will be likely able to operate a successful construction company in a highly competitive environment.
This would be beneficial to have constant checks and updates on the operations developed so far under the LLC forms, as well as new regulations affecting the industry.
In case you need expert help pertaining to this process, you can rely on EasyFiling. Our system makes it easy. We assist construction businesses with the organization of their LLCs and also ensure compliance with the legal requirements of the state.
EasyFiling has it all for your construction business i.e., filing the documents, providing you with registered agent services, and many more to ensure that your business has a strong base to build on. Book a free consultation today to form your LLC.