Tips for Starting a Construction Business in Michigan

If you’re considering starting a construction business in Michigan, it’s important to familiarize yourself with the state’s specific laws and regulations. For example, you’ll have to register yourself as a licensed contractor to offer your services in Michigan. And just like with other states, you’ll have to pay taxes based on the type of business you register as. Once you know the basics, you’ll need to take the following steps to get your company up and running legally.

Choose your entity type

Before you ever get started on paperwork, it’s a good idea to speak to your lawyer and your CPA about what type of entity your company will be. This is an important step because your accountant can help you decide what type of entity to set up in order to maximize your tax benefits. And your attorney can weigh in on the level of liability your choice will carry. You can choose to be a sole proprietor, LLC (limited liability company), corporation, C corporation, or S corporation. Each of these have varying degrees of liability.

Register your business

Along with registering your business as a specific entity, you will have to register your business name by filing a DBA (doing business as) with your county clerk’s office. And then you will have to register your business with the Michigan Department of Treasury. This department now offers a fully online registration process. Once you fill out the form, you’ll receive a sales tax license within seven days.

Talk to your accountant

When starting a new company, it’s best to hire a trained accountant to navigate your tax plan. Because tax regulations change frequently, trying to take care of things yourself could get a little tricky. And aside from federal tax regulations, you’ll have to follow the laws specific to Michigan. For example, if you own a commercial construction company in Kalamazoo, MI, you’ll be required to pay a 4.95% business income tax on all your income and a 0.8% modified gross receipts tax. An accountant can also help you set up quarterly tax payments and payroll should you decide to hire employees.

Talk to your insurance agent

All businesses need some type of liability insurance. But this is especially true in a business like construction where the chances of injury are greater. Liability insurance will protect you if someone sues you for injury and will help cover most court costs should you have to e in court.  Your insurance agent can also help you set up a worker’s compensation account. This is something you’ll only need to do if you have employees. But it’s best to talk about it now if you plan on hiring anyone in the future.

Network

The best way to get your business off the ground is by networking. In construction, you’ll never be working alone. You might find you like working with a particular HVAC contractor in Midland, MI or a specific plumber in Kalamazoo. It’s important to have good relationships with other businesses in your industry so that they are available to help you out in a crisis. And this, of course, should go both ways. To network in your particular field might not be as easy as attending social events. But there are always ways to meet them. The best way to do so is to talk to everyone you know about your new business. Let them know you’re looking for others in the industry. You never know when someone in your circle might be related to a nearby lumber supplier or married to a local window installer.

Adam Torkildson