How To Start a Construction Company in Georgia

Georgia has comprehensive rules governing who can be licensed as a contractor and what types of projects you can work on. It’s crucial to get the right license and register your construction business properly to avoid steep penalties or even closure.

In this guide, we’ll cover everything you need to know about how to start a construction company in Georgia. Read on for a complete guide to licensing, registration, insurance, and more.

How To Become a Contractor in Georgia: A Step-by-Step Guide

Becoming a contractor in Georgia requires getting a license and setting up your business for success. We’ll break the process down into five steps for you to follow. 

Step 1: Get licensed as a contractor

Georgia is one of the strictest states when it comes to launching a construction business. Most contractors will need to provide documentation of their education and work experience, plus pass 2 exams. The licensing process is complex, so we’ll break it down into a few parts.

Determine what license you need

First, you must determine the contracting license you need to operate legally in Georgia. There are 3 different licenses available:

• Residential Basic: Enables you to work on 1- and 2-family residences and 1-family townhouses up to 3 stories tall.
• Residential-Light Commercial: Enables you to work on multi-family residences and light commercial buildings up to 4 stories tall and less than 25,000 sq ft.
• General Contractor: Enables you to work on any residential or commercial construction project.

You and all subcontractors you hire must be licensed appropriately. The only exception is if you’re performing designated specialty work. If you don’t have a license, you have to be careful not to perform any work outside of your specialty.

Complete the licensing application

Georgia has an online licensing application that you must complete before you can sit for the necessary licensing exams. The application requires detailed information about you as well as supporting documentation showing you meet the specified requirements.

• Age: You must be 21 years old to be licensed as a contractor in Georgia.
• Net worth: You must have a minimum net worth of $25,000 for a Residential Basic or Residential-Light Commercial license and $150,000 for a General Contractor license.
• Background check: You must consent to a criminal background check as part of your application.
• Insurance: You must submit proof of having general liability insurance. The Residential Basic license requires a $300,000 policy, while the Residential-Light Commercial and General Contractor licenses require a $500,000 policy.

In addition, each license has experience requirements.

• Residential Basic: You must have worked under a licensed contractor for at least 2 years and completed 2 projects within the past 2 years.
• Residential-Light Commercial: You must have either (i) a bachelor’s degree in a construction-related field and 1 year of work experience under a licensed contractor; or (ii) 4 years’ experience working under a licensed contractor. You must also have completed 2 light commercial projects within the past 2 years.
• General Contractor: Same as for Residential-Light Commercial.

Once you submit your application along with the required $200 application fee, it will be reviewed by the State Licensing Board for Residential and Commercial General Contractors. If your application is accepted, you’ll be able to sit for Georgia’s 2 licensing exams.

Pass the licensing exams

Georgia requires you to pass 2 exams to receive your license:

• Georgia Business and Law Exam: Assesses your understanding of running a construction business in Georgia, including regulatory responsibilities.
• Trade exam: There are specific exams for each license type. The exam for the General Contractor license is the National Association of State Contractors Licensing Agencies (NASCLA) National Commercial Building Contractor Examination.

Once you’re licensed, you need to renew your license every 2 years. This is a much easier process that mainly entails submitting a renewal application through the same online portal you used for your original application. Residential Basic and Residential-Light Commercial contractors must complete 3 and 6 hours of continuing education per year, respectively, while General Contractors in Georgia have no continuing education requirements.

Step 2: Choose a business structure

You have a few options for how to structure your new contracting business. This is important because your business structure impacts your liability in the event of an accident or lawsuit, as well as how your business will be taxed.

Let’s take a look at the most common structures for a construction business in Georgia and how they work.

Most types of construction businesses in Georgia are best off structured as an LLC. They shield you from personal liability and give you flexibility to choose how you want your business to be taxed. You can form an LLC by registering with Georgia’s Secretary of State and paying a $50 annual fee.

Note that even if you don’t form an LLC, all licensed contractors in Georgia are still required to register with the Secretary of State. That’s different from states like Texas, where sole proprietorships and partnerships don’t need to file any paperwork.

Also, be sure to check whether your city and county have filing requirements. Many cities in Georgia, including Atlanta, Augusta, Macon, and Savannah, require you to get a business license and pay business taxes to operate.

Step 3: Purchase insurance

Insurance is essential for protecting your business from lawsuits, and several types of construction insurance are required by law in Georgia. Here’s what you need:

General liability insurance

Georgia requires all licensed contractors to have general liability insurance. The minimum coverage is $300,000 for Residential Basic contractors and $500,000 for Residential-Light Commercial and General Contractors. You may want to stick with the minimum coverage while starting up your business to save money, but remember to think about increasing your coverage as you take on more work.

Even if your business only conducts specialty work and doesn’t need a contracting license, it’s critical to have liability insurance. This protects your business in case someone is injured on one of your jobs or if property is damaged during construction. Without liability insurance, your business could be on the hook if something goes wrong.

Workers’ compensation insurance

All construction businesses in Georgia are required to have workers’ compensation insurance if they have 3 or more employees. That number includes part-time and seasonal employees, as well as yourself if your business is structured as an LLC or corporation.

Builders risk insurance

Builders risk insurance isn’t required for construction in Georgia, but many lenders and cities require businesses to carry it. This type of policy insures the building you’re working on, so you’re covered in case of damage. It also covers any materials and equipment your business is using on a job. 

Builders risk insurance is well worth considering, even if it’s not required, especially if you plan on leaving expensive construction equipment at a job site overnight.

Vehicle liability insurance

If your business owns any vehicles, they must be registered and insured. Georgia requires a minimum of $25,000 in Bodily Injury Liability insurance per person and $50,000 per incident, as well as $25,000 in Property Damage Liability insurance per incident.

Professional liability insurance

Professional liability insurance, also known as “errors and omissions” insurance, isn’t required by law in Georgia. It’s distinct from liability insurance and covers your business in the event of preventable mistakes made during construction. While this coverage is technically optional, many homeowners and commercial building owners will hesitate to work with a construction business that doesn’t have professional liability insurance.

Step 4: Hire employees and subcontractors

Once the foundations of your business are ready, it’s time to hire employees and connect with subcontractors.

A good way to start hiring is to use your personal connections in the local construction industry. For example, if you’ve met skilled workers from another company, you can invite them for coffee to discuss your new business and offer them a job.

If you need a larger workforce, it’s a good idea to invest in hiring software to streamline the process. Hiring software can help you advertise your open roles to potential candidates, keep track of applicants throughout the hiring process, and make offers to individuals you want to bring into your company. You can also reach out to recruitment agencies that specialize in hiring within the construction industry.

Complying with Georgia labor laws

As you start bringing on employees and subcontractors, you need to be aware of Georgia labor laws. Jim Marino, CEO of Alpharetta-based Pinnacle Home Improvements, said, “Staying ahead of the curb on labor laws and wage requirements is very important. You must carefully ensure that everyone is classified appropriately, as doing this incorrectly can lead to penalties and compliance issues.”

Here are a few of the most important labor laws to be aware of:

• All new hires must be properly classified as employees or independent contractors. You must also verify individuals’ authorization to work using E-Verify.
• Any subcontractors you hire must be licensed contractors in Georgia unless they’re only performing exempt specialty work. Employees working under your supervision don’t need to be licensed.
• Most construction businesses in Georgia are subject to the federal Fair Labor Standards Act (FLSA). This means you must pay employees the federal minimum wage of $7.25 per hour and pay overtime at 1.5 times an employee’s regular pay rate if they work more than 40 hours in a week.
• If you have 3 or more employees (including yourself for an LLC or corporation), you must have workers’ compensation insurance.
• If you have at least $1,500 in quarterly payroll or at least 1 employee for 20 weeks per year, you must pay the Georgia unemployment tax.
• Georgia is a right-to-work state, so you can’t require employees to join a union. You also can’t discriminate against workers who choose to join a union.

Step 5: Start growing your business

Now you’re ready to take on your first jobs and grow your construction business. There are a variety of resources available to help you find work, depending on what types of jobs you’re interested in bidding for.

• The Associated General Contractors of Georgia offers networking opportunities to connect you with larger construction companies.
• The Georgia Procurement Registry lists all bid opportunities for the Georgia Building Authority.
• The Georgia Department of Transportation has its own system for accepting bids.

It’s also important to market your construction business. Build a website that highlights the services you offer. Contact companies in your area that might need your business, such as larger commercial and residential building companies. You can also network with construction-adjacent businesses like real estate and architectural firms to find opportunities.

How Much Does It Cost To Start a Construction Business in Georgia?

Starting a construction business in Georgia isn’t overly expensive, but expect to spend at least $1,650 and potentially up to $7,400. Here’s a breakdown of the costs to launch a construction business:

• Licensing application fee: $200
• Georgia Business and Law Exam fee: $72
• NASCLA exam fee: $130
• LLC registration fee: $50
• Liability insurance: $700-$2,000 per year, depending on your specialty.
• Workers’ compensation insurance: $500-$5,000 per year (highly variable based on payroll).

You should also plan to invest in construction management software to help you streamline operations. The good news is that if you have fewer than 10 employees, you can use Connecteam for free.

3 Tips for Starting a Georgia Construction Business on a Budget

In addition to the steps above, here are a few tips to help you start a Georgia construction company.

1. Pursue grants to get your business off the ground. Small business-focused programs like the Rural Business Development Grant and Small Business Administration 7(a) loans can help you get the funding you need to buy equipment and hire employees. Depending on where your business is located, you may also be eligible for the Cobb County Entrepreneurship Grant Program or the Athens Downtown Development Authority grants.
2. Lean on subcontractors and rentals. If you take on projects that require expensive construction equipment, consider renting it from a company like Sunbelt Rentals or Northeast Georgia Rentals. You can also hire a subcontractor who already owns that equipment. These options are a lot cheaper than buying heavy equipment yourself.
3. Go above and beyond for your first jobs. Your first clients will be a crucial source of testimonials for your business. It’s really important to impress them with your attention to detail and customer service.

Disclaimer

This guide is provided for general informational purposes only and does not constitute legal, tax, or professional advice. Construction licensing, labor laws, permitting requirements, and tax rules in Georgia are subject to change and may vary by city, county, or project type. Compliance obligations also depend on the specific facts and circumstances of your business. Before taking action, consult with a qualified attorney, accountant, or the appropriate state or local authority to ensure you meet all legal and regulatory requirements.