making the all mighty decision HELP

[kenaslan]

Every business that fails, does so for the same reason - undercapitalization

I learned that in a sales class


But for real, to the OP:

How much money you bring in, how much you spend, how long it takes to get paid, etc. all contribute to capital issues

Wiring houses up to 12,000 square feet isn't something a guy's gonna do in a few days and get paid by the end of the week.

You need some money stashed, good credit, and some solid business advice from a contractor's group or equivalent. And tax advice.

I think a lot of undercapitalization begins at tax time

What if the capitalization is a non issue, the bigger question is, is this a good time to start an EC company? I say this because I am thinking of restarting my EC/GC construction company. After 10 years I have gotten burned out of engineering. I miss being out in the field. Still have most of my tools, just need to dust them off, and have 2 years of operating capital. The economy I think is quite shaky, and frankly, I just don't believe the outlook the government is feeding us. As always they are trying to manipulate the upcoming election (but I digress). I live in a small town of 100,000 people so would need to have a 4 to 5 hour radius. When I lived in the San Fransisco bay area (San Jose), work was within arms distance.

The next question is, how many people would you think it would take so a company owner would not need to work "With The Tools On", and do the office work, estimating, supervising, ect... I was thinking 4 to 6 people. Any thoughts on that?

 

[gadfly56]

Your talking about a government employee being efficient? Have you ever been to the DMV?

There are go-getters everywhere.

As for the DMV, I have to say that as oft-maligned the old NJ DMV was, I never had a bad experience in 30+ years and after they were privatized and became the Motor Vehicle Commission, they became more efficient. YMMV.

 

[James L]

What if the capitalization is a non issue, the bigger question is, is this a good time to start an EC company? I say this because I am thinking of restarting my EC/GC construction company. After 10 years I have gotten burned out of engineering. I miss being out in the field. Still have most of my tools, just need to dust them off, and have 2 years of operating capital. The economy I think is quite shaky, and frankly, I just don't believe the outlook the government is feeding us. As always they are trying to manipulate the upcoming election (but I digress). I live in a small town of 100,000 people so would need to have a 4 to 5 hour radius. When I lived in the San Fransisco bay area (San Jose), work was within arms distance.

The next question is, how many people would you think it would take so a company owner would not need to work "With The Tools On", and do the office work, estimating, supervising, ect... I was thinking 4 to 6 people. Any thoughts on that?

Capitalization:
You may have enough capital to start, but if you lose it through mismanagement, lack of work, competition driving prices down, etc you will become undercapitalized. Two years is pretty good.

This can also be affected by the issue of employees and how many. Efficiency is always going to be the key.

I used to be a GC, lasted from 2001-2005
I had a long trail of inefficiency, starting with the fact I really didn't want to run a business. I thought I did, but I wanted to work with my hands.

So I was always looking for someone else to run admin work. But I was afraid of overpaying wages, so I looked for people to work cheap. Same with field employees. I tried every semi-skilled guy I knew, and veat my head against the wall for 4 years trying to figure out why these guys weren't cutting it.

I finally threw in the towel on that fiasco after crunching numbers and realizing I was working 80 hours a week for 200 bucks. All because I approached it from a mind not set on value and efficiency.

After that, I took a hib for a bit. Next time out I was quicker to see a bigger pucture. I had one guy only. And I learned it's much better to overpay than underpay. You should pay a guy high enough that it's gonna hurt you if he's not great.

Get to the top of the scale. If wages are loosely $18-32 per hour, pay a guy $33-35

You will make a decision about a guy by lunch time if he has that much potential to hurt you.

How many guys you need will really depend on on many parameters like pricing, the quality of customer, etc. You will more than likely have to feel your way into that

 

[Fulthrotl]

I read earlier threads about LLC's and scorp great advice. I am about to start a business doing 95% resi ranging from 2500 sqft to 12,000 in Texas. I will have one employee but paying him as a sub contracted. I plan to keep it just him and I as long as possible. Of course just like any company doing anything I want to grow so I know that my company may change as the years pass in terms of inc, llc, etc. With the parameters I have described would I be better off as sole proprietor, dba, llc. Im lost when it comes to all this as im sure all are in the beginning. I however am working with VERY tight funds and hoping the great people here can give advice from wise years of experiences. Any advice is greatly appreciated

you need state specific information. what works in calif. might be your worst nightmare in another state.

calif didn't permit LLC's for electrical contractors until relatively recently.
the idea is to shield you from personal liability from business liabilities.
the second idea is to save on taxes.

both ideas vary widely from state to state, and depending on your situation.
i'm still a sole proprietor. LLC didn't give me any benefits with either taxes or
personal liability here, and it's another layer of accounting to deal with.

the best thing i've found for sheltering income is a self employed ira.
i can put 25% of my taxable income into it, up to $52k a year, but you have
to be 59 1/2 to do that. so it amounts to simply putting money into a bank
account, and then having it taxable when i withdraw it.

i have subbed stuff out to other people recently, but they are C-10's, and
i'm just offloading work i don't have time to do.

the ONLY advice i can give is to not 1099 employees, calling them "subs."
it'll draw audit flags so fast it'll make your head spin, and the resulting
fines will solve your "tight money" situation, as there won't be any money
left.

and when the feds get done with you, there will be a small issue with
workers compensation insurance. in texas it's nowhere like california.

in california, i'd rather be selling heroin on a bad street corner in compton
than have a "subcontractor" working for me get hurt, when i don't have
workers comp insurance in force. i think they just shoot you for that here.

 

[kwired]

:thumbsup:

Here is what I find at the IRS

Common Law Rules


Facts that provide evidence of the degree of control and independence fall into three categories:


Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?


Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)


Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?


Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.


The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.

And it sort of says right in that content that it is not always clear cut.

There are many subcontractors that only work for a single client and the client has quite a bit of control over the subcontractor activity. A well written contract does help distinguish them from what otherwise may be called an employee.