Licensing, Insurance and Your First Ten Customers

The first check you write should go to the state, not the sign shop.

I've watched a good framer spend eighteen hundred dollars on a truck wrap and a logo before he found out his county wanted a license he didn't qualify for yet. Beautiful truck. Sat in his driveway for five months. Meanwhile the guy down the street with a magnetic door sign and a certificate of insurance was booking work through a property manager.

Order of operations matters more than ambition here. License, entity, insurance, bank account, then customers. Do it backward and you'll be turning down the good jobs because you can't produce a piece of paper.

Find out what your state actually requires, not what the internet says

Licensing in the trades is a state-by-state mess, and half the advice floating around is somebody describing their state and assuming it's yours.

Texas has no state license for general contractors. Electricians, plumbers and HVAC techs there are licensed at the state level, and the rules are nothing alike. Florida splits contractors into certified, which works statewide, and registered, which only works in the local jurisdiction that licensed you. California runs everything through the Contractors State License Board and requires a license for work above a low dollar threshold the legislature keeps adjusting, plus a surety bond and, in most cases, documented journeyman-level experience before you can even sit for the exam.

So start at the source. Search your state's contractor licensing board, then search your county, then your city. All three can want something from you. A trade license, a business license, a home occupation permit if you're running it out of the house, and a sales tax permit if your state taxes materials the way yours probably does.

Write down three things for each: the experience requirement, the exam, and the fee. The experience requirement is the one that bites. Several states want four years of verifiable journeyman time signed off by somebody who employed you. If you burned a bridge at your last shop, go patch it now, before you need a signature.

The entity, and the part everybody skips

An LLC takes an afternoon and a filing fee in most states. It doesn't make you bulletproof, and it doesn't replace insurance, but it separates your business bank account from your house in a way a sole proprietorship doesn't.

Get your EIN directly from IRS.gov. It's free and takes about ten minutes. Anybody charging you seventy dollars for one is selling you a form you can fill out yourself.

Then open a business checking account and a business debit card, and stop paying for lumber with the same card you buy groceries with. Your accountant will charge you by the hour to untangle a mixed-up year, and you'll deserve it.

On taxes: you're now paying self-employment tax at 15.3 percent on top of income tax, and nobody's withholding it for you. Quarterly estimated payments are the norm. A common rule of thumb is to move 25 to 30 percent of every deposit into a separate savings account the day it lands and pretend it doesn't exist. Sit down with a CPA who has contractor clients before your first quarter closes. One hour of their time is cheaper than a penalty letter.

Insurance is what gets you on the job site

General liability is the baseline. Most general contractors and property managers will ask for $1 million per occurrence and $2 million aggregate, and they'll want a certificate of insurance listing them as an additional insured before you set foot on the property. That endorsement takes your agent a day or two to issue. Ask for it the moment you get the call, not the morning you're supposed to start.

Workers' comp is required in most states once you have employees, with thresholds that vary. Texas is the odd one out, where private employers can opt out of the state system entirely. Plenty of GCs will still require it from you regardless of what the law says, and some will require it even if you're a one-man show, because their own policy gets audited.

Two gaps that catch new owners:

• Your personal auto policy probably won't cover the truck while it's working. Commercial auto is a separate product. A denied claim on a loaded van is a very expensive lesson.
• Your tools aren't covered by general liability. That's inland marine or a contractor's equipment policy. Photograph your tools, record serial numbers, keep the list somewhere that isn't the gang box.

And understand what a surety bond is, because most people get this wrong. A license bond doesn't protect you. It protects your customer and the state. If the bond pays out, the surety comes after you for the money. It's a condition of doing business, not a safety net.

Getting paid, which is a different skill than doing the work

Set your terms in writing before the first nail. A signed proposal that names the scope, the price, the payment schedule and what counts as a change order will resolve arguments that a handshake won't.

Many states cap how much you can collect as a deposit on residential work, and some require specific contract language and a cancellation notice for home improvement jobs. That's a state law question, and it's worth thirty minutes with a local attorney once, at the start.

Learn your lien rights early. Several states require a preliminary notice filed within weeks of starting work to preserve them, and if you miss that window you've given up your best leverage on the one job that goes sideways. Ask your attorney which notices your state wants and when.

Bill fast. Invoice the day you finish, not the end of the month. Take cards even though the processing fee stings, because getting 97 percent of the money today beats chasing 100 percent in March.

Your first ten customers

They're not coming from Instagram. They're coming from three places.

Other tradesmen. The plumber, the electrician and the roofer in your area all get asked for referrals weekly and all hate turning work away. Buy four of them coffee. Tell them exactly what you do and what you won't do. A tight scope gets referred more than "we do everything."

Property managers and small landlords. Boring, unglamorous, and they call every week. They care about two things: you answer the phone, and you show up when you said. Beat them on those and you'll never have an empty Tuesday.

Google Business Profile. Free, and it's how a homeowner three miles away finds you at 8 p.m. Fill it out completely, post real photos of your own work, and ask every satisfied customer for a review while you're still standing in their driveway. Asking a week later by text works about half as well.

Here's the trade-off nobody admits. Taking small, cheap jobs early fills your calendar and builds your review count fast, and it also trains a certain kind of customer to see you as the cheap option. Do the $300 service call for the property manager who'll give you forty more. Don't do it for the stranger who's already called three other guys for a price.

Price like a business, too. You're not billing 2,080 hours a year. Between estimates, driving, invoicing and rain, you'll be lucky to bill half of that, and your rate has to carry insurance, fuel, tools, taxes and the truck payment. Cheapest guy in town is a title that gets handed to somebody new every eighteen months, usually after the last one quits.

Keep your OSHA 10 current and make safety visible on site. It reads as competence, and competence is the entire pitch.

The day a stranger calls because their neighbor told them to, you've got a business. Everything before that's just setup.