Legal Requirements For a Home Contractor Business

Home contractor businesses are an effective way to generate extra income while working from your own home, but before inviting clients and workers in, it’s essential that you familiarize yourself with all legal requirements associated with this kind of venture.

Your company must also be advertised through online and offline methods, such as social media and networking events. The home contractor industry is one that is really tough to get into in the beginning. However, as you grow your reputation and you do good work, it will become easier and easier. But, what do you need to start as a contractor?

Business structure

Establishing a home contractor business takes careful planning and attention to detail. A key decision when starting up is selecting an appropriate business structure; this choice has legal ramifications as well as having an effect on its growth. You have various options available to you when forming a home contractor business – sole proprietorships, general partnerships, LLCs or corporations each have their own set of advantages and disadvantages; some may require ongoing legal requirements while others have more complex formation and start-up costs associated with them.

Your choice of business structure will have an enormous effect on operations, taxes and liability issues – as well as how much of your personal assets could be at stake if unexpected events such as lawsuit debt settlement arise. LLC and corporation structures allow you to establish your business as its own legal entity while safeguarding personal assets from being used against it in case of litigation or bankruptcy – something especially crucial if seeking outside investment or expanding in the future.

Business licenses

To operate successfully as a home contractor business, licensing requirements vary by state but typically include passing a trade exam to demonstrate your knowledge of industry codes, laws and best practices as well as providing proof of financial stability, liability insurance coverage and worker’s compensation or surety bond coverage.

A business license is a government authorization to conduct business within specific geographical jurisdictions. A variety of federal, state, county and city offices grant these permits with different requirements imposed upon them by various governing authorities; it’s important to research the licensing needs in your local area as failing to do so may incur fines and other penalties; additionally it is often mandatory that businesses carry general business insurance which includes worker’s compensation coverage as well as commercial auto and general liability policies.


Contractors should invest in several insurance policies designed to cover potential claims or accidents during projects, including professional liability, general liability, workers’ compensation, business interruption and auto coverage. It is recommended that these policies are purchased or renewed prior to starting their contracting business; although premiums may seem costly at first, contractors should remember the fact that without coverage a client could sue and claim everything that belongs to them; having tailored policy that fits the contractor can protect against this happening and best of all it allows them to meet client demands without losing everything they own in court! For assistance determining what types of coverage are necessary, contractors can speak with experienced insurance professional who can advise them on this.