How to Know Whether an LLC or a Corp is the Best Fit for Your Construction Business

How to Know Whether an LLC or a Corp is the Best Fit for Your Construction Business

There are a number of factors that should be considered when deciding whether to set up your business as a corporate or limited liability company (LLC). This includes the type of work that you do, the number of employees that you have, as well as various tax considerations. Deciding to formalize the structure of your company as an LLC or corporation has important implications and should only be undertaken when you have a clear understanding of the pros and cons of each. Once you have a general contractor license, and before filing papers, consider getting expert advice to ensure that you make the right decision for your business. Choosing a Corporation vs. LLC An LLC (limited liability company) is a hybrid form of partnership that offers many of the advantages of a corporation and a partnership. Profits and losses can be passed through to owners without the business being taxed, and owners are shielded from personal liability. A corporation can be taxed, held legally liable for its actions and can make a profit. The main benefit of a corporation is the protection from legal liability while two key disadvantages are the costs to incorporate and the extensive paperwork that needs to be filed. An S-corporation (Subchapter corporation) helps avoid double taxation which is a drawback for regular C corporations. Business Freedom We find that, for most construction businesses an LLC is the best fit because, while both a corporation and an LLC offer protection for the owner from liability, an LLC offers more freedom in how the business is managed. An example of this is in an LLC’s operating...
The Importance of a General Contractor License in Florida

The Importance of a General Contractor License in Florida

In order to run a profitable, sustainable business as a licensed general contractor in Florida you need to comply with the relevant regulations for the state. This includes holding the correct permits and licenses. Florida State’s licensing requirements are specific and, depending on the nature of your work; you may need a different license in order to work legally. Contracting without a license in Florida is a serious offense, and the penalties are severe. For this reason, it’s important to understand who monitors compliance, what the different licenses are, as well as the consequences for non-compliance. Who Monitors Contractor License Compliance? In Florida, applying for a contractor license is done with the Construction Industry Licensing Board (CILB) headquartered in Tallahassee with field offices throughout the State. They are responsible for licensing and regulating the construction industry. They meet regularly to consider applications, adjudicate on disciplinary cases as well as conducting licensing and discipline hearings. Their website offers the functionality to perform a Florida contractor license search which makes it easy for all parties involved in a project to verify that they are working with a contractor who holds a valid general contractors license. It’s an important check as it can help protect an owner from having to double-pay, and also reduces the risk of a subcontractor or supplier not being paid by the general contractor.  The website also allows complaints to be lodged and has a portal for contractor license applications. What are the Different General Contractor Licenses? In Florida the law provides for two different license classifications: ‘Certified’ – a certified contractor license is valid throughout Florida ‘Registered’...
The Importance of Filing Annual Reports with the Secretary of State

The Importance of Filing Annual Reports with the Secretary of State

There are around 2 million businesses in Florida including many general contractors that are required to file an annual report by May 1st including LLCs as well as limited and limited liability partnerships in order to continue operating as legal entities that comply with the regulations set by the state. Basic information needs to be updated annually including the primary business location, the officers’ names, as well as the business agent’s details. It is important to note that the annual report does not include financial information but is rather used to update state records. Regardless of whether or not businesses need to make changes, it is still a legal requirement that the annual report be submitted to maintain their ‘active’ status with the Department of State in Florida. The cost to file depends on the type of business. If the report is filed by May 1st, the costs are $150 for-profit corporations, $138.75 for limited liability companies and $500 limited or limited liability partnerships. There are important implications for general contractors who neglect or forget to file including late fees, company dissolution and potential loss of business. Late Fees Regardless of the business entity that a contractor operates under, they are required to file an annual report. The report must be filed by May 1st otherwise a late fee of $400 applies. Unfortunately, the penalty is automatically applied by the filing system and as such cannot be reduced or waived. A failure to file an annual report can also result in expensive feeds for reinstatement in addition to other penalties that can be more than $900. Company Dissolution The...
8 Different Licensing Services That You Might Need as a Florida General Contractor

8 Different Licensing Services That You Might Need as a Florida General Contractor

Once a contractor has passed the state exam, there are a number of licenses and reports that they will be required to hold in order to work as a general contractor in Florida. There are also several that may become necessary under certain circumstances. Eight important licensing and reporting requirements include initial applications, change of status, state and county registration, additional business licensing, license reinstatements, financial stability reports and works comp exemptions. Initial Applications (Including Certification and Registration) Once a contractor has passed their State exam, they will need to provide trade-specific information. As these requirements vary from trade to trade, using a specialized application service can save time and money as delays have a direct impact on a contractor’s ability to work. Change of Status (Also Known as a Transfer) In the event of a contractor moving from one company to another, there are licensing implications. The State requires that a contractor files an application and meets specific requirements to be eligible to transfer. This process can be time-consuming as there are often delays. County and State Registration Once contractors have passed the state county exam, they are required to obtain a State Registration as well as a Certificate of Competency (also referred to as a county registration) in order to operate as a general contractor in Florida. Registration and Renewal of Licenses Registering your license is a requirement if you are working, wanting to obtain permits or advertising in a local municipality. Keeping up to date with State and County license renewals allows a general contractor to remain in compliance with Local Codes and State Statutes. Additional...
How to Get a General Contractor License in Florida

How to Get a General Contractor License in Florida

To get a Florida contractor’s license, you are required by the state of Florida to be approved by the Department of Business and Professional Regulation, and there are two key steps to complete before a license can be issued: first, completing the exam and second, submitting an application. There are two different licensing classifications. The first is a general contractor certified license. This is valid throughout Florida and grants permission for the contractor to work anywhere in the state. The second is a general contractor registered license. This limits the contractor to working within certain specified local jurisdictions. The contractor is also required to hold a certificate of competency issued by those jurisdictions. Step 1: Complete the Exam Certified General Contractor License in Florida An applicant who has applied for a certified general contractors license in Florida will need to pass the Florida State Construction Examination before beginning the application process. General Contractors License Exam Developed by the Bureau of Education & Testing, the examination is split into three parts, and the applicant is required to pass all three. The three exams are project management (written exam taken at a test center), contract administration (written exam taken at a test center) and business and finance (computer-based exam, administered at Pearson VUE). The first and second test segments may be taken in Orlando, Miami or Tallahassee (the applicant is required to select a first and second choice when applying). The tests can be taken in February, April, June, August, October, and December. In order to take the tests, the completed application and fees need to be received by the testing...
What is a Florida Contractor’s License and Why is it So Important?

What is a Florida Contractor’s License and Why is it So Important?

In order to provide contractor services in Florida, a person should hold a general contractor’s license. In Florida, there are two classifications for contractor license, namely ‘certified’ and ‘registered.’ A contractor should hold a valid license to avoid penalties and a loss of rights (an exception is if the scope of work falls under ‘basic handyman services’). What is the Difference Between a Registered and a Certified Contractor License? The key difference between the two is that a certified contractor license allows the contractor to complete work throughout the entire state whereas a contractor with a registered contractor license is limited to specific jurisdictions. Certified Contractor License To become a certified contractor, a contractor needs to pass the Florida State Certification Exam, either the Division I (for general building and residential contractors) or Division II license (for trade-specific contractors such as commercial pool installation, HVAC, drywall and plumbing). The Division I exam consists of 3 sections: Project management Contract administration Business & finance The Division II exam has only two sections Business & finance Trade knowledge Registered Contractor License To become a registered contractor, you need to have passed the certification exam or hold a Certificate of Competency (issued by the local licensing office). Why is a Florida Contractor’s License Important? Holding a valid license is vital to avoid penalties issued by the State of Florida, as well as the loss of rights that happen as a result of working as a contractor without a license. To Avoid Penalties In Florida, unlicensed contract work is taken very seriously. A first offense (considered a 1st-degree misdemeanor) allows for up to...
Understanding the Notice Requirements Under Florida’s Lien Law

Understanding the Notice Requirements Under Florida’s Lien Law

An Introduction to Lien Law and Filing the Notice Commencement If you work in the construction industry or own a property that requires work done to it, it is important to have a thorough understanding of Florida’s lien law and the Notice to Owner requirements. What is the Purpose of Florida’s Lien Law? The lien law can be utilized by a supplier, contractor or subcontractor to ensure that they are fully compensated for work that they complete or for their materials. It also protects the owner of a construction project from having to pay twice for work done or materials associated with the project. What are Lien Rights? These are the rights established by law in Florida that allow a lien to be filed in the event of non-payment. It’s important to understand the implications of this to make sure builders are compensated for their work, and owners do not become a subject of a lien or end up paying twice for the work. Lien rights are particularly important because of the way that they govern the builder’s relationship with the owner of the property as there can be a significant impact on lien rights if there is a crossover between a subcontractor and a contractor’s scope of work. Common Contract Situations and Implications for Serving a Notice to the Owner There are two main contract situations that commonly arise: when the contract is with the owner of the property, and when the contract is with someone else other than the owner. Contract with the Owner If the contract is for an amount greater than $2500 between the owner...
Worker’s Compensation in Tampa, Florida: We Answer Your Top Questions

Worker’s Compensation in Tampa, Florida: We Answer Your Top Questions

All businesses that are involved in construction in Florida, including Tampa, are subject to a specific set of rules and regulations that govern the way that they do business. We’ve compiled a list of the most important questions that will help prevent experience mod workers’ compensation overcharges. Is my business classified as a construction business? The best way to check this is to access the Florida Division of Workers’ Compensation which has published the official list of which business class codes are considered to be part of the construction industry. Here is a link to the list: https://www.flrules.org/gateway/notice_Files.asp?ID=10040390 For businesses in the construction industry, what are the requirements for workers’ compensation compliance? Florida legislation for construction businesses requires either an active workers’ compensation policy or alternatively, a valid exemption for workers’ compensation. Even if you already have an exemption for yourself as the owner of the company, you will still need a valid workers’ comp policy that covers each individual that you employ. The legislation stipulates that every employee that works on a construction site in Florida is required to be covered by a workers’ compensation policy (or hold a valid exemption). This ruling applies to both long-term employees and short-term hires that are brought on to the job site to help out. How does an exemption work and can I apply for one? You can apply for a worker’s comp exemption if you are a business owner, it allows you to be excluded from having to buy workers’ comp insurance for yourself. Note that this means that if you are hurt on the job, you will not be...
What Customers Look for When Hiring a Contractor in Florida

What Customers Look for When Hiring a Contractor in Florida

Being a general contractor license holder is one thing–being a contractor that customers would love to hire is another. It’s not just about pricing your services well. For a customer to hire you, it’s also important to have the contractor’s license, qualifications, references, and the right workforce. This article discusses some of the things that would make your business more attractive to customers. Get the Correct Florida Contractor’s License Make sure you have the proper FL contractor’s license for your particular expertise and a specific project. Remember that to work on any of the following you must have a FL contractor license: air-conditioning, building, general, mechanical, plumbing, pollutant storage, residential, roofing, sheet metal, solar, swimming pool or spa, and underground utility and excavation. You do not need a contractor license in Florida if you’re doing a project connected to window treatments, wallpaper, paint, flooring, countertops, cabinets, etc. As the holder of a contractor’s license in Florida, you have to be bonded and insured. This shows to your customer that if an accident happens in a project or if you fail to perform in accordance to your contract, they are protected. By indicating that you want your customers to be projected means you are confident enough in your services. Highlight Your Experience Potential customers will check out what past customers have to say about the contractors they are about to hire. Be ready to present references, whether they may be colleagues, peers, or previous clients. Make sure to have at least 5 credible references that know your work well. A new customer may contact references and ask about your abilities...
Construction Contracts: What to Keep in Mind as a FL Contractor

Construction Contracts: What to Keep in Mind as a FL Contractor

It’s good to always be on top of your construction contracts as a holder of a contractor’s license in Florida. You might just want to assume everything will go well. However, a lot of things can go awry when you begin a brand new project. You have to take the time to go through your contract for any flaws or errors. When you do so, you are saving yourself a whole lot of time and effort on legal problems. Timelines Check that the contract has a workable and feasible timeline for both yourself and your customer. On the one hand, customers (property owners, recipient of construction services) probably have stringent deadlines in mind. The customers may have other scheduled tasks that are contingent on your project finishing on time. Maybe a homeowner wants you to finish an addition to their property before they can put it up for sale. On the other hand, you as a FL contractor’s license holder need to say yes to a timeline only if it is doable. Do not over-commit or under-commit. Pricing Before commencing the project, have an agreed price for services that will be rendered by the contractor. Make sure that all details are in the contract. Also, specifications must be made on the pricing scheme. Would the payment be done in lump sum? Through rate per unit? Or is there a more applicable pricing method you have in mind? Terms of Payment The contract must indicate if you would like to receive monthly payments or a lump sum. If you are receiving monthly payments, check that the payment amounts and dates...