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Guide To Starting A Construction Contracting Business In Montana

Updated on May 28, 2011
So you are thinking of starting a Construction Contracting business?
So you are thinking of starting a Construction Contracting business?

Before Applying For That Contractors Registration Number...

Construction Contracting...a challenging opportunity ripe for a small business; be it remodeling, new construction, or commercial work. We who live in Montana live by the rule of diversification. This rule says that you are wise to have many skills and many methods of providing for yourself and your family a reasonable income. Perhaps you are a Carpenter or other tradesman who is interested in expanding his horizon. You know that one way of getting ahead is to take the road of entrepreneurship. Perhaps you are already in the Construction Industry and would like to formalize all those odd jobs you've taken on in your personal time because the demand is enough that you could venture out on your own or at least is tantilizing enough to have you considering it. So where do you begin?

Firstly, I would suggest taking a moment to consider your current skills. Compare them to what services you envision your future company providing. Are they already sufficient? Or would you choose to be a manager of other skilled tradesmen? Will you have employees or will you be the proverbial one man army with a hammer?

You will also need to decide which of the following you will be as a business structure: a Sole Proprietor, Partnership, or some form of Corporation. There are advantages to each of the different types. I won't go into them here, except to inform you that if you choose a type of corporation as your structure then you will need to round up and file the appropriate organizational documents for it (here - scroll down to step three on linked site), as it would detract from the primary purpose of this expose which is to give the basic processes to get you from the state of being an average joe to being the driver behind the wheel of a construction contracting business.

I am going to assume that you already have a fairly decent collection of tools to begin with if you plan to do the work yourself starting out. If not you might consider what resources are in the area to rent, lease or buy what you will be needing. Don't get crazy with this. It is better to hold off till you know for certain you need specific items for a specific job than to roast your savings on a tool that you never end up using for the next two years. That all is the fun stuff, now for the nitty gritty of the setup process.

There are few things in the world of labor & money so rewarding as being your own boss.
There are few things in the world of labor & money so rewarding as being your own boss.

Benefits of NARI National Membership

Number One. You need to secure and register your business name. In Montana you cannot use a business name already in use by someone else so first you must find out if the one you want is available. The mt.gov site which is full of resources says, "To find out whether a business name may be available, call the Business Services Bureau of the Secretary of State's Office, (406) 444-3665." After confirming your business name's availability you will complete an application for an Assumed Business Name here. There is currently,as of this writing,a $20 fee due with the application.

Number Two. Now assuming you've decided what business structure you will be: Sole Proprietor, Partnership, or Corporation, the next step will be to apply for a federal EIN online from the IRS. An EIN is an employer's identification number. You will need this number for other business legal paperwork involved in getting set up and for tax purposes if you will have employees or if might soon in the future due to growth. If you don't plan on having employees you can just get by using your social security number (SSN) in place of the EIN.

Number Three. Next is to register your business with the Montana Department of Revenue for income tax withholding. Go to this page for instructions. The link to register online is on the page near the bottom. There is a list of items which you will need to have ready.

  • FEIN or SSN
  • Date starting business
  • Legal business name
  • Assumed business name
  • Current mailing address
  • A contact name & phone number
  • Physical location address

Number Four. When the above step is completed, you are ready to go shopping for Workers Compensation Insurance, Liability Insurance, and Bond. These are important. The Worker's Compensation Insurance you will need for yourself even if you have no employees. Without it you would have to jump through a lot of hoops to get an Independent Contractors Exemption Certificate that entails all sorts of qualifying milestones to prove you are not someone's employee as well as many other things. It is also more expensive for getting the certificate as opposed to the basic Construction Contractors Registration. When shopping for Worker's Compensation Insurance, Liability, & Bond you will hunt through insurance companies and their offerings until you find one which is financially acceptable to you. The Worker's Comp is required for moving to get your Construction Contractors Registration application completed. So break out the yellow pages of your local phone book, go to the Insurance section and call the companies that list Contractors or Business insurance as one of their products. Make a list of what they offer. Call until you have obtained at least three quotes from different insurers. You will need to keep certificates of your Worker's Compensation Policy & Liability Insurance & bonding on file for your business. It is also a good practice to provide your customers with copies of your certificates as part of your customer service practices.

Number Five. Pick an Employment Agency from those in your area for if you ever find you need helpers...this must be notated on your CCR (Construction Contractor's Registration form) Application.

Number Six. Visit your bank and inquire about the processes involved in setting up Completion Escrow Accounts for Construction Projects. These are particularly useful for large projects that exceed the average homeowner's pocket change or yours. It entails a third party (the bank) who manages the account and disburses the funds to the particular parties per the stipulations in the project contract. It is a useful and sometimes a confidence building tool for both you the Contractor and the Homeowner/Customer when construction contracts rise into the thousands or projects run on for longer than two or three weeks. Few residential contractors who dive into the Construction business can afford in the early years to foot the costs of both the labor and the materials. By setting up a CEA, invoices for materials can be paid directly from the account by the homeowner's funds for the project thereby avoiding any creditor difficulties with the material vendors. Some material & equipment vendors also offer their own contractor purchasing accounts which can be used to purchase materials on limited credit. This is also worth exploring at this time. Go to the vendor's Contractor's Desk if they have one and ask to speak to an account manager.

Think of organizing your new business just like you organize a jobsite or a project.
Think of organizing your new business just like you organize a jobsite or a project.

Starting a Remodeling Project

Homeowner Responsibilities During a Remodeling Project

Scheduling During a Remodeling Project

Number Seven. Now you are ready to apply for your Construction Contractor's Registration. The current cost in Montana for it is $53. You will need to have ready the following items:

  • Worker's Compensation Insurance Company name
  • Worker's Compensation Insurance Policy Number
  • Worker's Compensation Insurance Effective Date
  • Completed Business Registration with Montana Secretary of State
  • Name of Temporary Worker Service Contractor, phone, address, city/state/zip
  • Be able to state if you will have or do have employees or not.

Number Eight. Once you have your Construction Contrator's Registration number in hand you are ready to go open a business bank account using your new business name. It is a good idea to have one and that it is separate from your personal checking account.

Number Nine. Time to consider if you will need an Accountant. It is a good idea to have one at least on a consulting retainer for tax time to avoid headaches. It is also nice to have someone you can go to, to ask questions about your accounting books and record keeping.

Number Ten: Don't wait to get a good accounting software. It can pay to start off with one rather than try to transfer records later. I recommend QuickBooks myself. There are several versions out there which you can purchase in the box or you can go for the free 30 day trial of QuickBooks Simple which will give you some operating time before having to fork out the dollars for it. Other bookkeeping software favored by Contractors include Peachtree, Construction Partner, Accu-build, and EasyAs.

Ok! You are essentially done with the set up. The above process should have taken roughly somewhere between 2 - 4 weeks.

You are now ready to start thinking about how you will advertise your business and start producing proposals (bids) on projects. I would suggest starting with creating a set of business cards (include your construction contractor's number on it & the phrase "licensed, bonded, insured'. Start handing them out to family, friends, aquaintences; even the lady at the supermarket. Always keep some in your back pocket. They are an inexpensive way to spread the word you are in business.

Another inexpensive way to get the word out is to write a brief press release for your local newspaper. The press release would basically state that you are a new business in such & such location, available for bid opportunities, and a little bit about your company & your background or skills. Short & sweet. Type it up and mail or email it to your local newspaper. Be sure to use the 'professional' letter formatting for it but with the title "Press Release".

So there you go. A quick brief on how to get started. It is remarkably simple and easy to do which opens the door of opportunity to many people who might otherwise be intimidated into never taking the entrepreneurial road. I wish you the best of fortune with it. There are few things in the world of Labor & Money so rewarding as being your own boss. If you have any questions or difficulties you are welcome to ask a question here or leave a message for me. I'd be happy to try to answer or help.


How To Tell If A Project Schedule is Good

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