Forming a construction company in Washington
If you want to start a construction company, there are many steps that you need to take at the outset of your business. Without the proper type of planning and preparation, your business may never fully get off the ground. A construction company needs to be viable, both in the eyes of potential customers and investors. Further, you need to do everything in your power now to protect yourself from liability if things go wrong because you can end up personally responsible. The work that you do now can make the difference in whether your business is ultimately successful.
You can do some things on your own, but you could find yourself stretched in many directions when you are beginning your own business. You may not have the professional and technical experience to perform other tasks. Many of your startup tasks are legal in nature. Even if they are not, the legal infrastructure of your business can determine whether you can successfully complete other tasks, such as raising capital.
It is in your best interest to hire a construction law attorney who can help you with the business law aspects of forming a company in Washington. A business attorney can review your situation and provide key tactical advice to help your business get started. They can also prepare the paperwork that you need to start your construction company. Your construction lawyer becomes your partner as you build your business, especially since they will get to know you and your goals.
In the meantime, here are the steps you need to take to start a construction company in Washington, especially those that may require the help of an experienced construction law attorney.
Incorporate the Business in Washington
The earliest steps that you will take are to legally form and incorporate your business. You need to select a corporate form for your business. In many cases, you may choose to incorporate as a limited liability company. An LLC has many advantages for your construction business. Your personal liability can be limited to the amount of money and assets that are in your business, protecting you from a lawsuit. In addition, an LLC allows you many flexibilities in structuring and operating your business. You may consider other types of corporate forms before choosing how to incorporate your business.
You will need to draft the necessary documents to begin your business and set some of the ground rules for how it is to be operated. These documents may include:
- Operating Agreement: If you have chosen to use an LLC, the operating agreement will set the ground rules for how your business is to be run, how decisions are made and the relationships between the members.
- Bylaws: These set forth procedures that management must follow when running the business and the roles and responsibilities of various corporate committees
- Shareholder Agreements: If your construction business is seeking capital from investors, you need to have a legal agreement that delineates the rights of the investors.
- Articles of Incorporation: If you have selected a corporation, this is a brief document that incorporates the business and is filed with the Washington Secretary of State.
You may also need to make key choices, such as how you will incorporate your business for tax purposes. These decisions may impact your finances and the potential success of your business. You should have a business law attorney help you make these choices and draft the documents on your behalf to ensure they are done correctly.
Seek Capital to Help Your Business Operate
Construction companies can be a very capital-intensive business. You may need to purchase costly equipment to complete any jobs. In addition, you may need to demonstrate financial stability, both when you bid on jobs and when you seek bonding for the jobs that you win. You may not have enough money on your own to form and begin a construction business.
You may need to borrow or raise money to begin your business. When you seek a loan from a bank, they will review your corporate documents to see how your business is run. A bank would want to know that you are a worthy credit risk before they lend you money. The amount of risk you pose determines whether you can qualify for a loan and the interest rate you may pay.
These principles hold true when you are trying to raise money from potential shareholders. They want to know that your business is a safe and attractive investment. You may also need to negotiate the terms of any investment and draft an agreement that states shareholders’ rights and provides them with protections.
Review and Negotiate the Necessary Contracts
Starting any business means that you will enter into a multitude of contracts. These agreements can be with vendors or customers. You may need to purchase expensive construction equipment or enter into lease agreements for them. Your business may have to negotiate complex financing agreements to afford the equipment you need to operate your business.
Contracts are legally binding documents that give you both rights and obligations. If you or someone else does not follow a contractual agreement to the letter, you can end up in costly litigation.
When you are just starting a business, you likely do not have the contract expertise to handle anything on your own. Even if you did, it is not a good idea to draft or sign a contract without the help of a construction lawyer. If you end up in a dispute, the court may need to interpret what is in the document. You would be bound by the clear language of the contract.
An experienced lawyer can draft and review any necessary contracts, knowing that every word and comma in a document takes on critical importance. They can negotiate any changes on your behalf and justify any changes to the language you may be seeking.
Learn the Contracting Legal Landscape
Getting help with contracts goes far beyond drafting and reviewing agreements. When you sign a contract, you are bound by its terms. Before signing an agreement, you need to understand exactly what it means to be bound to a contract. You must know what it means to have both rights and obligations that you must follow. This knowledge will counsel you as you bid on construction work and negotiate agreements that can lead to more revenues for your business.
While it helps you to know about contracts, you should not try to be your own expert. If you try to take a DIY approach to legal agreements, you can end up in court and with risk. As much as you may know, trusting a lawyer with your construction business contracts always makes sense.
Purchase Workers’ Compensation Insurance
If your construction company has one or more employees (which is virtually always the case), you will have a legal obligation to purchase workers’ compensation insurance from the Washington Department of Labor and Industry. The rates for the insurance vary, but you can expect to pay, on average, roughly $1.50 for every $100 of insured payroll. Since your construction business is new, you will not be able to self-insure.
There can be serious consequences if you do not follow the law and purchase workers’ compensation insurance for your employees. You can face the following penalties:
- Daily fines for every day that you do not have workers’ compensation insurance
- Fines on a per-worker basis for the failure to purchase insurance
- Stop work orders keeping you from progressing on a construction job
- Potential felony charges against you as the business owner
Further, an injured employee can sue you directly in a personal injury case if you do not have workers’ compensation insurance. You can face crushing legal liability that could have been averted by purchasing workers’ compensation insurance.
Learn of Your Compliance Obligations
Construction companies must follow a myriad of rules and obligations in their daily business. If you have employees, you need to follow an extensive set of rules from the Occupational Safety and Hazard Administration. In addition, you may also need to follow environmental rules that can apply to your individual job. There may be books and recordkeeping requirements for your corporate records and for documents that could show compliance with these rules.
Compliance is something that you must stay ahead of at every step of the way. Regulators can literally be at your door when they learn that you violated the rules. They can issue large fines and even shut down your business when there are serious violations.
Compliance is an ongoing obligation. There are always new laws and interpretations that can affect your business. Before you begin, you should always learn the legal landscape that faces your business so you do not open yourself up to any liability. You should also learn the general principles of liability law to understand where your business can face lawsuit risk when you commence operations.
Purchase Other Types of Insurance
In addition to workers’ compensation insurance, your business will likely need other types of protection. The last thing that you want is to go out of business or end up personally liable when you are sued. The most important type of insurance to consider is general liability. There is much that can go wrong when you are running a construction business, and you need to be protected when something happens.
You may wish to consult with an insurance broker to learn about the various types of insurance coverage your construction business may need. You should err on the side of caution and purchase all the various types of coverage you need so you do not have any unwelcome surprises in the future. Further, you should opt for more than bare-bones coverage and increase the amount of insurance you purchase as your business grows because you have more to lose.
Get Help from a Business Law Attorney
A construction law attorney can provide you with all the legal help you need at every stage of the business formation process. There is clearly a reason why you want to start a construction company in Washington. You believe that you have knowledge of the industry and the business acumen necessary to make money. There are things that you are good at that can help you grow your business. However, there are also things that you may not know that can catch you by surprise later after it is too late. Many of these aspects are legal in nature because you often do not know what you do not know.
When you hire a Skilled business law attorney familiar with the construction industry, they can provide you with full-service help that covers nearly all aspects of the start of your business. They will sit down with you for many hours to learn your goals and what you hope to accomplish. Your construction law attorney will then tailor an overall approach to your business and help you with the individual tasks that you need to get started on your construction company. Before you begin your business, it is vital that you talk to a construction lawyer to learn more about what you may be facing.
Starting and running a construction company in Washington can be a complex and challenging endeavor. From navigating the legal requirements and regulations to ensuring proper contracts and agreements, there are various legal aspects that need to be addressed. That’s where a business law attorney can be incredibly valuable.
Retaining a business law attorney can save you time, money, and potential headaches. They can assist you in drafting and reviewing contracts, ensuring that your agreements are legally sound and protect your interests. Additionally, they can help you navigate the licensing and permitting process, ensuring that you comply with all the necessary requirements.
The more work you do at the outset and the greater your investment in corporate infrastructure, the more you can reduce your potential liability in the future. If you need to get involved in any lawsuits, it can take your focus away from your work and threaten the viability of your business. Therefore, you should schedule an initial consultation with a business law attorney if you have not already done so.
