Setting up properly before the first job: the stuff your apprenticeship did not cover

Your apprenticeship taught you the work and almost nothing about running the business around it: pricing, tax, contracts, cash. The paperwork side is cheap and takes about a week. The two things that take longer, the license and the insurance, are the ones to start first. Do it in this order and nothing has to be redone. Here is the sequence, the trap at each step, and what it actually costs.‍‌​‌​‌​‌​‌​​‌​‌‌‌​‌​​​​​‌‌​‌‌​‌‍

What the apprenticeship did not teach, and where it bites

Nobody ran a class on this, so the same mistakes turn up on the first job of nearly every new contractor: working off a text-message quote with no written contract in a state that requires one, taking no deposit or one over the state's cap, pricing materials plus labor and forgetting everything else, invoicing late, giving extras away, running business money through a personal account, and doing licensed-level work before the license arrives. Each one is fixable before it happens. The mistakes that sink new contractors is the short list; the steps below are the order that avoids them.

Step 1: Pick a structure, and a name

Start as a sole proprietor and you have nothing to file, but you and the business are the same thing, so your house, truck and savings are exposed if a job goes wrong. A single-member LLC is taxed exactly the same, on the same Schedule C with the same self-employment tax, and draws a legal line between the business and your personal assets. That is why it is the answer for most tradespeople. Form it in the state where you actually work, not a "cheap" state, or you register twice. The S-corp election is a tax switch you flip on top of the LLC later, once profit is steadily past about $70,000 to $80,000, and not before. Sole prop, LLC, or S-corp: which should you be? walks the choice.

If you will trade under anything other than your own legal name or your exact LLC name, you register a DBA, and before that you check the name is available as an entity in your state, as a web domain and on Google. Naming the business after yourself is simple and fine if you plan to stay small; it is harder to sell later. Naming your business, DBAs, and branding basics is the three checks and the one legal step.

Step 2: Get your EIN, and pay nobody for it

Your federal Employer Identification Number is free from the IRS, takes about ten minutes online, and keeps your Social Security number off invoices, W-9s and bank paperwork. Dozens of websites rank above the IRS in search results and charge up to $300 to "file" it for you; the FTC warned those operators in 2025. If a site wants money for an EIN, close the tab. Going out on your own: your first steps has the whole week of paperwork in order.

Step 3: Register with your state and your city

State formation for the LLC, the general business license your city or county wants from anyone operating at all (which is not the contractor's license, see step 5), the DBA filing, and sales tax registration if your state needs it. On that last one, most states treat you as the end user of your materials: you pay sales tax at the supply house, price it into the job, and never put a tax line on the customer's invoice. Some states treat contractors as retailers instead, where a resale certificate lets you buy tax-free and collect from the customer. Get it wrong and the state assesses the uncollected tax on you, and you usually cannot bill the customer for it afterward. Confirm your model in Do I charge my customer sales tax on a construction job? and Working in Your State before you price anything.

Step 4: Open the business bank account before the first invoice

A dedicated business account, with every business dollar through it and nothing personal. Two reasons. Clean books and a painless tax return are the first. The second is the one people learn the hard way: run personal and business money together and a court can decide the LLC was never really separate, and hold you personally liable for its debts, which erases the protection you formed it for. Open a second account beside it for the tax set-aside. Then get a free D-U-N-S number and a Net-30 account or two at your suppliers, because that is how a business credit profile starts, and 12 to 18 months of on-time tradelines is what gets you a line of credit later. Expect to personally guarantee any borrowing under about $500,000 for years yet. Business banking and building business credit is the ladder; the Business Account Security Checklist is how you keep the account yours.

Step 5: The license, the bond, and what your journeyman card does not do

There is no national contractor's license. Whether you need one depends on your state, your trade and the size of the job, and it comes in three layers: a state license or registration, a separate trade license for electrical, plumbing and HVAC almost everywhere, and sometimes a city or county one on top. Your journeyman card lets you do the work; in most states it does not let you pull permits or contract in your own name. The dollar thresholds are not comparable between states either: California counts the aggregate contract price from $1,000 and blocks splitting a job to get under it, North Carolina starts at $40,000, Nevada measures the value of the work rather than the price. Check yours on the Contractor License Checker, then record where each job sits against it with the Contract Value and License Threshold Record.

Get this right before the first job, because there is no retroactive fix. In many states working unlicensed where a license was required means you cannot sue to collect, you lose your lien rights, and in California the customer can claw back every dollar they paid you for perfect work. Do I need a contractor's license? and What happens if you work without a contractor's license? are the two to read together, and How to get a contractor's license, step by step is the sequence.

Most states also make you post a license bond. It is not insurance for you: if you break the licensing rules and a customer is harmed, the surety pays them and then collects every dollar back from you. You pay a small annual premium against the bond's face value, priced mostly on your credit. Contractor license bonds explains the three parties. Working under someone else's license is legal only if that person genuinely qualifies the company and supervises the work; renting a name and number is illegal in most states and criminal in some (Can you work under someone else's contractor's license?). Once you hold a license, put every renewal date in the License and Insurance Renewal Tracker, because in several states a lapsed license is treated exactly like no license (Keeping your contractor's license current).

Step 6: Insurance, in this order

Most contractors need four policies, and each one covers a gap the others do not.

• General liability first. It pays when your work injures someone else or damages their property. Insist on an occurrence form, not claims-made, because construction defects surface years later. The common minimum contracts and licenses ask for is $1,000,000 per occurrence and $2,000,000 aggregate. It does not pay to redo your own bad work. General liability insurance for contractors, explained.
• A tools and equipment floater (inland marine). Your other policies do not cover your tools at all. The trap that voids more claims than any other is theft from a vehicle that was not locked with evidence of forced entry. Log serial numbers and photos in the Equipment Register before anything goes missing; under 7 percent of stolen hand tools come back. Tools and equipment insurance.
• Commercial auto, if the truck is titled to the business or you use your personal truck for work, because personal policies exclude business use. Do I need commercial auto insurance for my work truck?
• Workers' comp the day you hire anyone. Every state except Texas requires it from the first employee, and putting a worker on a 1099 does not dodge it if they are an employee in substance. Solo, you are usually exempt on yourself, which means no comp benefits if you are the one hurt, so carry health and disability cover. The Workers' Comp Estimator prices it by trade. Workers' comp for contractors.

Premium is driven by your trade, payroll, location and claims history, so get real quotes rather than a number off the internet. What insurance do I actually need as a contractor? is the overview.

Step 7: The money system

Three habits, and none of them need an accounting degree. Run every dollar through the one business account. Photograph every receipt (thermal receipts fade to blank within a year). Use the cash method, so you are taxed on money you actually collected, not on invoices nobody has paid. A spreadsheet plus the separate account is genuinely enough while you are solo; a free tool like Wave is the next step, and QuickBooks earns its cost when you need real job costing. Bookkeeping for the trades and Accounting software for a small contractor cover both.

Then the tax. Set aside 25 to 30 percent of every payment you take in as profit, move it to the second account the day the money lands, and pay it four times a year on the 1040-ES dates (April 15, June 15, September 15, January 15). In your first year there is no prior-year tax to safe-harbor against, so estimate from actual profit as you go. How much should I set aside for taxes when I'm self-employed? and When do I pay my taxes if I'm self-employed? are the two rules; What's Due This Month is the calendar. Bring in a CPA when you hire, weigh an S-corp, or carry long jobs across year-end (When to hire a bookkeeper or a CPA). And open a retirement account now, even small, because nobody is building you a pension and the habit is worth more than the first deposit (Retirement when nobody's building you a pension).

The Monthly Business Admin Routine is the once-a-month hour that keeps all of this from piling up.

Step 8: The paperwork that protects every job

This is the step most new contractors skip, and it is where the disputes come from.

• A written contract. For residential work many states legally require one once the job is over a small dollar amount, and leaving out required contents can void the whole thing or kill your lien rights. Parties, scope, price, payment schedule, dates, and whatever your state mandates. Many states also cap the deposit on residential work, and some require it to be held in escrow. The Contract Must-Haves Checklist is the list; The contract that protects you is why.
• The 3-day notice. Sign a contract worth $25 or more at the customer's kitchen table and under the FTC's Cooling-Off Rule they get three business days to cancel for a full refund, and you must hand them the notice that says so. Do not order custom materials or start irreversible work inside that window. Can a customer cancel the contract after signing?
• A tight scope and an exclusions list. The scope is the line between what your price covers and what is extra; the exclusions paragraph ends half your change-order arguments before they start. What Is NOT Included: Exclusions List attaches to every quote. Scope of work and exclusions.
• A change order, signed before the extra work starts. "Can you just also do X while you're here" stops being a fight at the end. The Change Order Form generates one in a minute. Change orders: how to actually get paid for extra work.
• An invoice with a real due date. "On receipt" is a hope, not a term. Net 15 or net 30, sent the day the work is billable, with a follow-up rhythm behind it. The Invoice That Actually Gets Paid and Deposits and progress billing.
• A job file. Contract, change orders, photos, invoices, lien notices, kept at least three years, four for anything to do with employees, and for as long as you own an asset plus three. Job File: What to Keep.
• Your customer data. The big state privacy laws mostly do not reach a small contractor. Breach-notification law does, in every state, with no small-business exemption. Know what you hold with Customer Data: What You Hold and How Long.

Step 9: The safety card

Federal OSHA does not require an OSHA 10 card. Your state, your city or the general contractor very often does, and the 30-hour card is what supervisors carry. If you are ever going to walk onto a commercial site, get the 10 before someone asks for it at the gate. Do I need an OSHA 10 or 30 card?

What it costs, honestly

The paperwork is the cheap part: the EIN is free, and state formation, DBA and business-license fees vary by state and are in Working in Your State. Insurance is priced on your specifics. Gear: buy used where the tool does not care, and remember every tool is deductible in full the year you buy it. The real number is the runway. Most people obsess over the forms and underestimate the cash: have work lined up before you jump, and hold about three months of overhead in reserve, because the gap between doing the work and being paid for it is what decides whether a new contractor makes it. What does it really take to start out on your own? puts the three things in order: work, cash, then paperwork.

Where to go next in this section

• Going Out On Your Own: Setup Checklist, the nine steps above as a tick list, in the order that avoids rework.
• The money reality: what you will actually take home (15.6), so the set-aside in step 7 makes sense.
• Your first quote: how not to undersell yourself on day one (15.9), the first document you will actually send.
• Do you need a truck? Buying, leasing and the real costs (15.12), the biggest purchase most people make in month one.
• You've finished your apprenticeship. Now what? (15.1) if you skipped ahead.
• Your first year on your own: what actually happens (15.4).

Common questions

Do I need an LLC before my first job?

You can legally start as a sole proprietor with nothing to file, but most tradespeople should form a single-member LLC first because it draws a legal line between the business and your house, truck and savings if a job ever ends in a lawsuit. It is taxed exactly like a sole proprietorship, so it costs you nothing extra at tax time, only the formation fee and any annual fee your state charges. Form it in the state you work in, open the business bank account under it, and never mix personal money through that account, or the protection can be lost.

Is my EIN really free?

Yes, always. The IRS issues your Employer Identification Number free online in about ten minutes. The websites that rank above the IRS and charge up to $300 to "file" it for you are doing nothing you cannot do yourself, and the FTC warned those operators in 2025. Get the EIN even as a sole proprietor with no employees, because it keeps your Social Security number off invoices, W-9s and bank paperwork, and you need it to open a business bank account and to build business credit.

What insurance do I need on day one if I work alone?

General liability on an occurrence form, commonly $1,000,000 per occurrence and $2,000,000 aggregate, because most contracts and many licenses require it; a tools and equipment floater, because nothing else covers your tools; and commercial auto if you use a truck for work, because personal policies exclude business use. Workers' comp is usually not required until you hire someone, but solo you are also not covered by it if you are hurt, so carry health and disability insurance to fill that gap.

Do I need a contractor's license for small jobs?

It depends on your state, your trade and how the state measures the job, and the thresholds are not comparable between states. California licenses from $1,000 and blocks splitting a job to stay under it, North Carolina from $40,000, and Nevada measures the value of the work rather than the price. Electrical, plumbing and HVAC almost always need their own trade license regardless of job size, and needing a permit is one of the most common triggers. Check before you bid, because working unlicensed where a license was required can cost you the right to be paid at all.

What is the first document I should have ready before my first job?

A written contract with the contents your state requires, plus the exclusions list that goes with it. Many states require a written contract for residential work over a small dollar amount, some cap the deposit, and a contract signed in the customer's home for $25 or more comes with a federal three-business-day right to cancel that you must give notice of. Get the contract, the exclusions list and a change order form set up once and reuse them on every job. They are what turn a payment dispute into a short conversation.

The honest bit

• Formation fees, business-license fees, license thresholds, deposit caps and sales-tax models are all set by your state, and some by your city. Nothing in this guide replaces Working in Your State for your own numbers.
• The insurance limits here are the common contractual minimums, not a rule. Your contracts set the floor and your assets set the ceiling.
• The federal figures (the free EIN, the $25 in-home threshold under the Cooling-Off Rule, the 1040-ES dates) are current for 2026. Verify at irs.gov and ftc.gov.
• This is general guidance, not legal, tax or insurance advice.

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