Setting Up the Business

Get the foundation right from day one.

The basics

• Choose a business structure — sole proprietorship, LLC, or corporation (an LLC is common for the liability protection; ask an attorney/CPA which fits you).
• Register the business with your state and get an EIN (tax ID) from the IRS.
• Open a separate business bank account — never mix business and personal money.
• Set up bookkeeping from the start (see the Bookkeeping course) so you know your numbers.

Going Deeper (Intermediate)

The setup checklist before you take a dime: form an entity (usually an LLC), get an EIN, open a business bank account, set up bookkeeping, get insurance, and use written contracts. Keeping business and personal money separate from day one protects your liability shield and your sanity at tax time.

Advanced / Pro-Level

Setting up to be profitable, not just legal:

• Build overhead into your pricing from day one — the #1 new-contractor mistake is pricing like an employee (wage + a little) and forgetting insurance, truck, taxes, software, and your own salary.
• Bookkeeping/job-costing from the first invoice — you can't fix what you don't measure.
• Get bonded and insured early (it qualifies you for more work and protects you).
• Pick a niche you can dominate rather than being a cheaper generalist.
• Standardize a contract template (lawyer-reviewed) and a deposit/progress-payment structure to fund cash.

Practice Challenge

A new contractor prices a job at materials + his old hourly wage and wins easily. Why is that a trap? (Answer: he omitted overhead and true burden — insurance, vehicle, taxes, software, and a real owner's salary — so the "win" loses money on every job; price must be cost + overhead + profit, built in from day one.)

In Practice

A new contractor runs everything through their personal account and can't tell business from personal at tax time — a mess. Set up the entity, account, and books from day one.

Common Mistakes to Avoid

• Mixing personal and business money
• No proper entity or EIN
• Skipping bookkeeping setup

Takeaway: Pick a structure (often an LLC), register and get an EIN, open a business bank account, and set up bookkeeping from day one.

Educational overview — codes, permit rules, and business/licensing requirements vary by jurisdiction and change. Confirm with your local building department, attorney, CPA, and licensing board.