Contractors and Construction Professionals

Although both a Limited Liability Company (LLC) and a corporation can protect a licensed professional's personal assets, we find that most business owners are choosing to form an LLC for their business entity. An LLC can offer construction companies more freedom than a corporation in the management of the business, since an LLC's operating agreement can set forth or limit the rights, powers, and obligations of managers and members. An LLC also may not require some of the formalities of a corporation, such as annual meetings. In addition, an LLC has the tax advantage of pass-through taxation, with members reporting their share of the profits or losses on their personal tax returns.

About Business Licensing

Generally, our customers in the construction industry obtain a business license from the state, city and/or township offices in the location where the work is taking place. More than one license is sometimes required. Customers who are electricians or plumbers or are engaged in another specialty trade should consult the regulatory body that oversees their specific trade for licensing requirements. Not all states have the same requirements for licensure, and the requirements vary from state to state.

About Workers' Compensation

Workers' Compensation is a system created by each of the states to provide benefits to workers who are injured while working. These benefits may include medical care, temporary disability payments and compensation for permanent disabilities. Workers' Compensation laws vary significantly by state, and whether a company is required to obtain Workers' Compensation insurance will depend upon statutory law where the work is being performed. Generally, if a company has one or more employees, it will be required to obtain and maintain Workers' Compensation insurance for its employees.

About Business Insurance

We find that many of our construction industry customers purchase and carry business insurance to provide liability and other protection for their business. Personal or homeowners insurance often will not provide sufficient protection for even a small, home-based construction business. Issues such as whether it is beneficial for the company to obtain business insurance, the type of insurance to obtain, and the appropriate amount of insurance coverage will vary significantly based on the activities of the construction company. Insurance plans should be discussed with an insurance agent, but we can assist in the formation of a new LLC to help construction professionals separate and protect personal assets.