Contractor LLC Setup

We walk through LLC vs. sole prop vs. S-Corp election — plain language, not legal jargon. You'll understand the tradeoffs. The final legal and tax decisions are confirmed with your attorney and CPA.

Filing checklist, name availability, Articles of Organization, state-specific requirements. We coordinate the sequence — you execute the filing or your attorney does.

EIN acquisition walkthrough (same-day from IRS). Registered agent selection guidance — we explain the options and help you set it up.

Single-member or multi-member operating agreement framework. We provide the structure and key provisions to cover — your attorney finalizes the legal document.

Bank selection criteria, account types, required documents. Business bank account opened and separated from personal finances — the foundation of your liability protection.

Credit card processing, ACH, check acceptance — selection and activation guidance so you can collect payment from day one.

Do I need an LLC to work as a contractor?

You can legally operate as a sole proprietor, but an LLC provides personal liability protection — if the business gets sued, your personal assets (house, savings, vehicles) are shielded. For contractors working on job sites with physical risk, handling subcontractors, or taking on projects with significant liability, an LLC is the standard starting point. The specific entity decision (LLC, S-Corp election, multi-member) should be confirmed with a licensed attorney.

What's the difference between an LLC and an S-Corp for contractors?

An LLC is an entity type — it's the legal structure filed with your state. S-Corp is a tax election — it's how the IRS treats your income for tax purposes. You can have an LLC that elects S-Corp taxation. The S-Corp election can reduce self-employment taxes once your net income reaches a certain threshold (your CPA will know the number for your situation). Most contractors start as a standard LLC and consider the S-Corp election once revenue grows. This is a tax decision — your CPA should make the final call.

How much does it cost to set up a contractor LLC?

State filing fees range from $50–$500 depending on your state. A registered agent service runs $100–$300/year. An operating agreement template or attorney-drafted agreement runs $0–$1,500. EIN is free from the IRS. Business bank account opening deposits vary. Total DIY cost: $200–$800. Total with professional support: $500–$2,500+. The cost of doing it wrong — commingled finances, weak liability protection, incorrect tax setup — is far higher.

What do I need to form a contractor LLC?

The basics: (1) Choose your state of formation (usually where you operate), (2) Pick a business name and check availability, (3) File Articles of Organization with your state, (4) Designate a registered agent, (5) Get your EIN from the IRS (free, same-day online), (6) Draft an operating agreement (even for single-member LLCs), (7) Open a dedicated business bank account. Each state has slightly different requirements and fees. We coordinate the full sequence in Phase 1 of the Foundation Install.

Do I need a registered agent for my contractor LLC?

Yes — every LLC must have a registered agent in its state of formation. The registered agent receives legal documents and official state correspondence on behalf of your business. You can be your own registered agent in most states, but a professional service ($100–$300/year) means you don't need to be available at a fixed address during business hours and keeps your home address off public records. For contractors who are on job sites all day, a registered agent service is almost always the right call.

Should I form my LLC in my home state or in Delaware/Wyoming?

If you're a contractor operating primarily in one state, form in your home state. Delaware and Wyoming are popular for holding companies and multi-state businesses, but for a local contractor they add complexity with no benefit — you'd still need to register as a foreign LLC in your operating state and pay fees in both states. Form where you work. If you expand to multiple states later, your attorney can advise on restructuring.

Do I need an operating agreement for a single-member LLC?

Legally required in some states, strongly recommended in all of them. An operating agreement establishes that the LLC is a separate entity from you personally — this is critical if your liability protection is ever challenged. It documents ownership, how the business is managed, and how profits are distributed. Banks also require one to open a business account. Even a basic single-member operating agreement is better than none.

How long does it take to set up a contractor LLC?

State filing takes 1–4 weeks depending on your state (some offer expedited processing for an additional fee). EIN is same-day online. Bank account takes 1–3 business days once you have your LLC documents and EIN. Operating agreement can be done the same day with a template. Total DIY timeline: 2–6 weeks. Our Foundation Install compresses entity setup into Phase 1 (Days 1–7) with the full sequence coordinated end-to-end.

What's the biggest mistake contractors make when setting up an LLC?

Two mistakes we see constantly: (1) Forming the LLC but never separating finances — they keep using their personal bank account for business, which defeats the liability protection the LLC provides. A judge can 'pierce the corporate veil' if you treat the business as an extension of yourself. (2) Skipping the operating agreement — without one, some states apply default rules that may not match your intentions, and banks may refuse to open an account. Form it right, fund it right, document it right.

Can I change my LLC to an S-Corp later?

Yes. You file Form 2553 with the IRS to elect S-Corp tax treatment. The election can be made at formation or later — typically when your net profit reaches the threshold where the tax savings justify the additional payroll requirements. With S-Corp election, you must pay yourself a 'reasonable salary' via payroll, which adds administrative complexity. Your CPA should run the numbers and tell you when (or if) the election makes sense for your specific situation.