For General and Trade Contractors
Do Contractors Need an LLC?
You work on other people’s property, you sign contracts that assign blame, and you hire subs whose mistakes land on you. All three are reasons the entity matters here.
Form your LLC, $399 all inMost contractors should form an LLC. You take on defect and injury exposure on someone else’s property, sign contracts that allocate responsibility, and carry liability for subcontractors you hire. Without an LLC each of those reaches your personal assets. An LLC is separate from your contractor licence and bond, which are still required.
Three exposures stacked on top of each other
Contracting is unusual in how many directions liability comes from. The work itself can fail years later as a defect claim. The site can injure someone during the job. And the subs you bring in can create both, with the general contractor usually answerable for them. A sole proprietor absorbs all three personally, and defect claims in particular can surface long after the invoice was paid and the job was forgotten. An LLC makes the company the party to the contract and to the claim.
What you are actually exposed to
Construction defect claims
Work that fails later: a leaking roof, a failed foundation, faulty wiring. These surface years after completion and are the largest claims in the trade.
Subcontractor liability
Hire a sub who damages the property or injures someone and the general contractor is commonly on the hook, whatever the sub agreement says.
Site injury
Homeowners, passers-by, and your own crew. Job sites carry ongoing injury exposure for as long as you are on them.
Payment and lien disputes
Non-payment, change-order arguments, and mechanics lien procedure. These are contract fights, and the party to the contract is who fights them.
The LLC does not replace your licence or bond
Contractor licensing is state-run and often city-run on top, with separate classifications by trade and by project value. Most states also require a surety bond and proof of insurance to hold the licence. None of that is satisfied by forming an LLC. What does matter is the order and the naming: many states require the licence to be held in the name of the entity doing the work, and some require you to notify the board or re-apply when you change business structure. Check with your state licensing board before you start contracting under a new company name, because working under the wrong entity can put the licence itself at risk.
How to set it up
- 1
Check how your board handles entities
Ask your state licensing board what happens to your licence when you form an LLC. Some transfer it, some require a new application in the company name. Do this first.
- 2
Form in the state you work in
Form where the jobs are. Contracting is physical and local, so out-of-state formation adds foreign registration cost and gains nothing.
- 3
File your formation documents
We prepare and submit your Articles of Organization and track the filing to approval, with state fees included in the $399.
- 4
Move the licence, bond, and insurance across
Get the licence, bond, and general liability policy into the LLC’s name. A company that holds none of them is not the company doing the work.
- 5
Contract as the company from then on
Every bid, contract, and change order goes out in the LLC’s name. Signing personally hands back the protection you just paid for.
Questions contractors ask
Do I need an LLC if I already have a contractor licence and bond?
They do different jobs. The licence lets you work legally, the bond compensates a customer if you fail to perform, and neither stops a defect or injury claim reaching your personal assets. The LLC is what does that.
Will forming an LLC affect my existing licence?
It can, and this is the step to check first. Many states require the licence to be held by the entity performing the work, so changing structure may mean transferring the licence or re-applying in the company name. Contact your licensing board before you start working under the LLC.
Am I liable for my subcontractors?
Usually yes. A general contractor is commonly answerable for subs’ work and for injuries they cause, which is exactly why the entity matters more here than in trades where you only answer for yourself. Require your subs to carry their own insurance as well.
Does an LLC protect me from a defect claim years later?
It puts the company between the claim and your personal assets, which is the main benefit given how long defect claims take to surface. Keep the company in good standing and keep carrying insurance, because a dissolved company protects nobody.
LLC or S-corp for a contracting business?
Form the LLC first. S-corp is a tax election you can make on top of it later once profit justifies the extra payroll and filing work. Forming as an LLC now does not close that option.
What does it cost to form a contractor LLC?
With StartGlobal it is a one-time $399 with every state fee included, covering formation, registered agent, and your federal tax number. After that you can stay compliant from $99 a year.
LLCs for other trades
Ready to form your LLC?
One flat $399 with every state fee included. Registered agent and your federal tax number come with it, and there are no upsells at checkout.