5 Reasons to Incorporate Your Contracting Business

Before you start your contracting business, one of the things you’ll have to think about is how you want to structure it. Some contractors prefer to use a sole proprietorship or S Corp. Others want to create a C Corp. In any case, you should consider incorporating so that you can protect yourself and your business growth over time. Here are a few reasons you’ll be glad you got it right from the beginning.

Keep Your Business and Personal Finances Separate
When you first start your contracting business, you might think that operating as a sole proprietor is the easiest. After all, you’re the one doing the work. Why should you have to incorporate so that your clients can pay you? The answer might surprise you. One of the best things that you can do for your contracting business is to keep your finances for the company separate from your personal finances. You’ll need to have some way to separate them in order to do your taxes, but there are other reasons you can benefit from it. Even if all you do is create an LLC and a separate bank account, you’ll notice the difference come tax time.

Limit Your Personal Liability
Every now and then, you might read something in the news about a client suing a company for some kind of wrongdoing. When you have an established company, you can limit the ways that you are held personally liable. It’s a good form of protection to have, even if you’re not likely to make mistakes or make clients want to sue you. The security of keeping your personal life and your business life separate is vital. Without that separation, clients may be able to go after you personally, as well as your business. Sometimes, it can make the difference between keeping your business running and keeping yourself on stable ground.

Establish Credibility
When you’re first starting out as a business owner, you need all the credibility you can get. It’s common to choose a formal business name, even if it includes your own name, when you incorporate. You’ll also show potential clients, future employees, and other contractors that you have done the work necessary to create an actual business. In a world where almost anyone can design advertisements or business cards, whether they are a licensed contractor or not, that credibility might translate into more opportunities to help your business grow.

Create Opportunities for Funding
In those early years, you might be working hard to keep your cash flow on the level. Having access to funding, even the occasional small business loan or line of credit, can help you get what you need when you need it. But in order to qualify for a lot of these funding options, you’ll need to be an established business. With an active business license and the permits you need to operate in the area, you’ll make it easier to prove to potential lenders that you mean to make good on any loans they are willing to offer.

Make It Easier to Expand
Ultimately, your goal as a business owner will be to expand over time. You might not anticipate becoming a large corporation with thousands of employees, especially not quite yet. But after a few years, you may have a handful of employees and really wish that you had taken the time to incorporate at the start of everything. You’ll notice the difference every time you have to manage payroll. Getting ahead of the process doesn’t put you at risk, and will make it easier for you to grow over the next several years without having to make a big or sudden change.

Incorporating your contracting business as lots of potential benefits, even from the very beginning. To discover how you can run your own contracting business, visit CSLS today!

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Contractors State License Service (CSLS) is the largest school in California devoted to the Construction professional. For over 23 years, CSLS has helped its students pass the exam to become licensed contractors in the State of California, licensing more students than any other school. From our main offices in Southern California, CSLS operates over 25 locations with full-service support and classrooms. We have grown to this extent by providing quality, professional services. In comparison, this provides 7 times the number of convenient locations than the second largest contractor school. Contractors State License Services is one of the only contractor schools in the state that is run by educators, not lawyers or people mostly interested in the bonding and insurance business. Contractors State License Services formerly operated under the oversight of the State of California's Bureau for Private Post Secondary and Vocational Education. As of January 1 2010, the new Bureau for Private Postsecondary Education (BPPE) came into existence replacing the BPPVE. CSLS now operates under the provisions of the California Private Postsecondary Education Act of 2009 (CPPEA), Article 4 Section 94874(f). Our Mission is simple; We can help you pass your California Contractors License Exam. Celebrating our 25th year, CSLS has helped over 120,000 students pass the California contractor licensing exam to become licensed contractors in the State of California. Additionally, we offer complete home study and online contractor’s license programs to help you pass your California contractors license exam. CSLS offers licensing classes for all types of contractor licenses, including General Engineering Contractor, General Building Contractor, Specialty Contractor, Insulation and Acoustical Contractor, Framing and Rough Carpentry Contractor, Cabinet, Millwork and Finish Carpentry Contractor, Concrete Contractor, Drywall Contractor, Electrical Contractor, Elevator Contractor, Landscaping Contractor, Warm-Air Heating, Ventilating and Air-Conditioning Contractor, and many others. For a complete list of contractor licenses, visit www.MakeMeAContractor.com and tuned for more informative posts.