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 agreement; the company owners can expressly outline the obligations, powers, and rights of the manager and the LLC’s members. These rights, powers, and obligations can also be directly limited if needed.

An LLC also requires fewer formalities than those associated with a corporation. Specifically, annual meetings are not required.

Get Professional Advice and Assistance

If you want to set up an LLC, Contractors Reporting Services in Tampa FL can help. They’ll take out the stress, giving you the space to focus on building your business. Their professional, experienced staff have the expertise you need to get your paperwork handled efficiently. They will help you set up an S-Corporation or an LLC, whichever is the best fit for your needs.

They are also available to assist with ancillary services related to incorporating or setting up an LLC such as:

• Corporation Amendments – if any changes are made to the corporation such as changing officers or directors, they need to be registered and recorded the Secretary of State in Florida. Their team will provide fast, stress-free amendment filing so that you can focus on running your business.
• Annual Reports – annual reports are required to be filed every year in order for a Corporation or LLC to maintain their ‘active status.’ Failure to file annual reports can have serious implications, not least of which is a non-negotiable penalty of $400 for late filing which cannot be waived. Additional reinstatement fees and penalties can mean that costs to get your business on solid footing will exceed $900.
• Annual Minutes – When any changes are made to the structure of the corporation (such as amendments, changes of officers, and stock purchases or sales) the business is required to record them either in special minutes or under the annual minutes of the corporation.

Whether you decide on an LLC or a corporation, provided that they are formed and managed correctly, both will protect the business owner’s personal assets. This means that in the event of a claim or lawsuit filed against the business, only the assets that are owned by the LLC or corporation can be attached. If you have any questions, Contractors Reporting Services would like to be of assistance.

 

The following information was originally published on How to Know Whether an LLC or a Corp is the Best Fit for Your Construction Business and is courtesy of Contractors Reporting Services. Read more on:} Contractors Reporting Services Blog Tampa

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' – a registered contractor license limits the license holder to specific local jurisdictions.

Certified Contractors in Florida

To become a certified contractor in Florida, one must first pass the Florida State Certification Exam. The content covered depends on whether your application is for a Division I or Division II license.

For Division I license (general building and residential contractors), the exam consists of:

• Project management
• Contract administration
• Finance and business

A Division II exam (for trade-specific contractors such as plumbing, pool installations, drywall, and HVAC), there are two sections:

• Business and finance
• Trade knowledge

Registered Florida Contractors

Registered contractors must either have passed the Certification exam or hold a Certificate of Competency (which are issued by the local licensing office). Once this exam is passed one then submits a full application to the CILB in Florida along with:

• Proof of experience (minimum of 4 years or a combination of college and work experience)
• Credit report
• Fingerprints (for background checks)
• Proof of insurance (both public liability and property damage insurance that must be valid when the application is submitted.

What are the Penalties for Non-Compliance?

The State of Florida takes contract work done without a license seriously. For first time offenders, there is provision for up to a year of jail time or probation. Further offenses are considered a third-degree felony with jail time or probation of up to five years. Also, one can be liable for civil penalties of up to $10,000. An unlicensed contractor will also forgo rights as any contracts are unenforceable by law and liens are no longer valid. Also, if your work is found to be faulty or defective, treble damages can be awarded to the owner (and the contractor may have to return any payments made).

Navigating red tape and state bureaucracy can be frustrating, not to mention confusing. The team at Contractors Reporting Services in Tampa have been helping general contractors in Florida apply for licenses and permits for over 50 years. They’re ready to help you get your paperwork in order and assist with keeping your licensing up-to-date as well as ensuring that your permits are all in order. They understand that you need to be able to focus on building your business, without worrying about whether or not you are in compliance with Florida’s Construction Industry Licensing Board.

The following post was originally published on The Importance of a General Contractor License in Florida and is republished from Contractors Reporting Services. See more on:} Contractors Reporting Services LLC