Why Contractors Should Incorporate

Lately, we have all heard about construction, development, and other real estate related companies going out of business or finding themselves in the unenviable position of filing for bankruptcy in the face of outstanding judgments or debts.

We also all know someone who is the head of a construction enterprise and has yet to incorporate. The list of excuses for not doing so is long. These excuses range from not wanting to fill out paperwork to not wanting to hassle with state licensing authorities that a change in business form would take.

Such excuses are no longer viable given the small amount of time and effort forming a Limited Liability Company (“LLC”) or a corporation actually takes. In Virginia, as in most states, the process is fairly simple, especially for an LLC. A small fee, an address where you can be reached for service of process and corporate notices (whether at your home or at an attorney’s office), and a relatively simple application is all that the Virginia State Corporation Commission requires.

Because of this simplicity, the headaches of incorporation are far outweighed by the possible consequences of failing to take this simple step. Without an LLC or corporation, a creditor can, and will, go after your personal assets should you be in the unfortunate situation of dealing with a Court judgment. Incorporation puts a barrier between your personal assets (your home, car and even dog) and your business assets that can only be breached in limited circumstances.

An additional benefit of incorporation is that a business that gets in tough financial straits can close the doors, pay what it can to creditors, and move on. If done correctly, the business owner can reincorporate and start over with a clean slate.

If you haven’t already, be sure to take these simple steps to protect your business, and your personal assets. For assistance, contact an attorney or your state corporation commission.

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