How to Start a Contracting Business

Starting a contracting business is one of the best paths to self-employment in the trades. You already know how to do the work — the challenge is setting up the business correctly so you can focus on building, not drowning in paperwork. This guide covers every step, from legal structure to landing your first jobs.

1. Choose Your Business Structure

Before you do anything else, decide how your business will be legally organized. This affects your taxes, your personal liability, and how you handle finances.

• •Sole Proprietorship — Simplest option. You and the business are the same legal entity. Easy to set up, but you're personally liable for everything.
• •LLC (Limited Liability Company) — Most common for contractors. Separates your personal assets from business liabilities. Relatively easy to form and maintain. This is what we recommend for most new contractors.
• •S-Corp — Can save on self-employment taxes once you're earning well, but requires more paperwork (payroll, annual filings). Usually worth considering once you're clearing $70K+ in profit.

2. Get Licensed

Licensing requirements vary dramatically by state and municipality. Some states require a general contractor license for any work over a certain dollar amount. Others license specific trades (electrical, plumbing, HVAC) separately.

Check with your state's contractor licensing board and your local city/county office. Common requirements include:

• ✓Passing a trade or business exam
• ✓Providing proof of insurance
• ✓Posting a surety bond
• ✓Documenting relevant work experience
• ✓Paying licensing and registration fees

3. Get Insured

Insurance isn't optional. At minimum, you need:

• ✓General Liability Insurance — Covers property damage and injuries to others. Most customers and general contractors will require this before you step on a job site. Typical cost: $500-$2,000/year.
• ✓Workers' Compensation — Required in most states if you have employees. Some states require it even for sole proprietors in certain trades.
• ✓Commercial Auto Insurance — If you use a vehicle for work (you do), your personal auto policy won't cover business use.
• ✓Tools & Equipment Coverage — Protects your tools if they're stolen or damaged. Often available as a rider on your general liability policy.

Shop around. Get at least three quotes. And don't just go with the cheapest — read what's actually covered.

4. Open a Business Bank Account

This is non-negotiable. Mixing personal and business finances is the number-one bookkeeping mistake new contractors make. It makes taxes harder, makes you look unprofessional, and can jeopardize your LLC protection.

Open a dedicated business checking account. Get a business debit card. Run every business transaction through this account. When you connect it to a tool like Turnkey, your bank feed shows every transaction in real time and categorizes expenses automatically.

5. Set Up Your Bookkeeping

Don't wait until tax season to figure out your books. Set up a system from day one. You need to track:

• ✓Income from every job
• ✓Material and supply expenses
• ✓Subcontractor payments
• ✓Vehicle mileage and fuel
• ✓Tool purchases
• ✓Insurance premiums

QuickBooks Online is the industry standard for small contractor bookkeeping. Paired with a bank feed tool that auto-categorizes transactions, you can keep your books current with minimal effort. Save your receipts — photograph them with your phone so you never lose one.

6. Build Your Online Presence

In 2026, most customers search online before hiring a contractor. You need at minimum:

• ✓A Google Business Profile — Free. Puts you on Google Maps. Lets customers leave reviews. This is your most important online asset for local visibility.
• ✓A professional website — Doesn't need to be fancy, but it needs to exist, load fast, look good on mobile, describe your services, and have a way for people to contact you.
• ✓Online reviews — Ask every happy customer for a Google review. Five-star reviews are the most powerful marketing tool for a new contractor.

You don't need to become an SEO expert. A platform like Turnkey builds your website with SEO best practices built in, creates pages for every service and city you cover, and connects your lead capture form directly to your CRM.

7. Get Your First Customers

The first customers are always the hardest. Here's what works for new contractors:

• •Your existing network — Tell everyone you know that you've started your business. Friends, family, former coworkers, neighbors. Word of mouth is still the number-one lead source for contractors.
• •Subcontracting — Work as a sub for established contractors. You get experience, steady income, and build relationships that lead to referrals.
• •Google Business Profile — Optimize it with your services, photos of your work, and your service area. Ask early customers for reviews.
• •Nextdoor and local Facebook groups — Many homeowners post looking for contractor recommendations. Be active and helpful.

Once you start getting customers, the key is to deliver excellent work and follow up for reviews. A contractor with 20+ five-star Google reviews will get more calls than one with zero, regardless of experience level.

8. Use the Right Tools From Day One

The tools you choose on day one set the foundation for how organized (or chaotic) your business will be. At minimum, you need a way to:

• ✓Track leads and follow-ups
• ✓Create and send estimates
• ✓Invoice customers and collect payments
• ✓Track expenses and categorize transactions
• ✓Keep your books up to date

You can cobble this together with separate apps for each function, or you can use a platform like Turnkey that does it all in one place. We built Turnkey specifically for contractors who need to manage their business without spending hours on admin work.