Opening a Construction Business
Our law firm represents construction companies, including contractors and subcontractors in a wide range of specialties, including carpenters, HVAC specialists, masons, home renovations specialists, roofers, developers, electricians, landscapers, solid waste haulers and many others, from one man shops to large firms. We represent contractors at start up and throughout their life cycle. We have decades of experience assisting owners form and start their construction businesses.Choosing The Form Of The Business
A threshold issues when starting a business is what form should be chosen? A contractor can operate as a limited liability company (limited liability companies are known as “LLC’s”), a partnership, a “C” corporation, an “S” corporation or a sole proprietorship. Each has its own benefits and drawbacks.
- Partnerships and Sole Proprietorships. Sole proprietorships and partnerships have many advantages, the most important of which is that profits are not taxed to the business; they are only taxed as income to the owner, thus avoiding the “double taxation” of many corporations. They are also extremely flexible. However, there is no shield from liability; the debts and liabilities of the business can be collected directly from the owners themselves.
- Corporations. Unlike sole proprietorships and partnerships, the owners of corporations enjoy the “shield” of “limited liability.” In other words, they are shielded from the business’s debts. However, “C” corporations are subject to “double taxation;” profits are taxed as income to the business, and then taxed again as income when the profits are distributed to the owners. “S” corporations, on the other hand, can escape double taxation, but there are many restrictions on what an “S” corporation can and cannot do.
- Limited Liability Companies. Often times, therefore, the best option is an LLC. LLC’s provide the “shield” of “limited liability” of a corporation, the single taxation of a partnership or “S” corporation, and the flexibility of a partnership or sole proprietorship.
Our business attorneys have the financial, tax and litigation backgrounds to examine each contractor’s unique needs, determine what the business structure would be best suited for them, and then set up that structure. Our attorneys are experienced at guiding contractors through the complex administrative requirements of starting the business, including handling all of the complex paperwork requirements.Agreements Between the Owners
There is an old saying that good fences make good neighbors. In business, good partnership agreements make good partners. No matter how well the owners get along, a well-written agreement between them is the best way to ensure a long conflict free relationship. Our attorneys have decades of experience negotiating and drafting agreements between the owners of businesses which reflect their desired relationships, protecting their interests and providing mechanisms for avoiding and resolving disputes. Our business lawyers have successfully drafted hundreds of agreements.Contracts
Contracts are the most important document for operating a construction business. The terms of the relationship between the contractor and the owner, general contractor, subcontractor and vendors are set by their contracts.
Contracts determine the scope of the contractor’s work and the time frames within which it must complete the work, it sets the terms of payment, and indeed often determines whether or not the contractor will get paid at all. It determines where a dispute will be resolved, whether it be state or federal court, arbitration or mediation. Prior planning with an experienced construction attorney is essential.
Contracts should be drafted with the end in mind, and one of the most important ends the contract supports is getting the contractor paid. Toward this end, we make use of all of the tools which New Jersey’s construction laws provide, such as New Jersey’s Prompt Pay Act, and the New Jersey Construction Lien Law. We draft form contracts for contractors which include penalties for failure to pay, such as making the owner or general contractor responsible for paying costs of collection, including attorneys fees, if they do not make payment.Complying With The New Jersey Consumer Fraud Regulations
New Jersey’s Consumer Fraud Act prohibits deceptive practices in sales to consumers. A few years ago New Jersey extended the Consumer Fraud Act’s protections to “home improvement contracts.” Therefore, a contractor doing work for homeowners must be extraordinarily careful to ensure that it complies with the regulations issued by the Department of Community Affairs applying the Act’s requirements to contractors. The consequences for failing to do so are severe.Employment Law: Dealing With Your Employees One of a contractor’s most important – and expensive – assets are its employees. Employee relations are therefore extremely vital. All of the laws which apply to other industries apply to the construction industry as well, such as:
- New Jersey’s Law Against Discrimination, which prohibits discrimination and harassment of employees;
- The Wage and Hour Law and Federal Fair Labor Standards Act, which governs minimum wage and overtime;
- The Conscientious Employee Protection Act, which protects employees who disclose or object to illegal or fraudulent activities; and
- The New Jersey Family Leave Act and the federal Family and Medical Leave Act, which govern mandatory time off for family or medical issues.
The construction industry also has complex employment law issues of its own. One particular area of concern is the misclassification of workers as “independent contractors” when they should be paid as “employees.” While the “employee” classification is expensive because it requires the employer to pay payroll taxes, and often benefits such as health and workers compensation insurance, misclassifying workers can have drastic consequences. While the potential for significant monetary liability is great, the New Jersey Construction Industry Independent Contractor Act opens up the employer to potential prison sentences of up to 10 years and fines of up to $5,000 per day.
Contract our New Jersey construction attorneys to schedule an appointment by e-mail or call (973) 890-0004.