How to Start a Construction Company in Tennessee | Essential Guide

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Tennessee Construction Company

Starting a construction company in Tennessee can be lucrative and rewarding for anyone with the right skills, resources, and determination. With a strong demand for quality construction services and a consistently growing population of 7,080,262 (2024 data), there is always room for new Limited Liability Companies to thrive in this industry. However, starting a construction company is a challenging task and requires careful planning, dedication, and hard work.

In this article, Webinarcare Editorial Team will discuss the necessary steps to Start a Construction Company in Tennessee and provide valuable tips for ensuring your success in this competitive industry.

How to Start a Construction Company in Tennessee

What is a Construction Company?

A construction company in Tennessee is a business that specializes in the planning, design, and execution of construction projects. These projects can range from residential homes to commercial buildings and infrastructure projects such as roads, bridges, and utility systems. Tennessee construction companies must adhere to local building codes, regulations, and licensing requirements to ensure their projects are safe, efficient, and compliant with state standards.

Tennessee construction companies often offer various services, including general contracting, design-build, and specialized construction services. They collaborate with various stakeholders, such as architects, engineers, developers, and property owners, to bring projects to life. By employing skilled tradespeople, project managers, and other professionals, construction companies in Tennessee work to deliver high-quality, durable structures that meet their client’s needs and contribute to their community’s development and growth.

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It is suggested that you speak with a legal professional before you begin setting up a construction company. They’ll understand what’s best for you and your future company. To safeguard your personal assets from business debts, you can always start an LLC in Tennessee.

– WEBINARCARE EDITORIAL TEAM

How to Start a Construction Company in Tennessee

To launch a construction business, you must follow the guidelines that include researching the construction industry, developing a business plan, registering your business, securing funding, purchasing equipment and material, hiring a skilled team, and marketing your construction company.

Step 1: Research the Construction Industry

Before diving into starting your construction company, it’s essential to understand the local construction industry in Tennessee. Research your area’s market trends, major players, and potential competition. This will help you identify gaps in the market that your company can fill and allow you to make informed decisions about the types of services you want to offer.

Some key areas to research include:

  • Types of construction projects in demand (residential, commercial, etc.)
  • The average cost of construction projects in your area
  • Local building codes and regulations
  • Key stakeholders in the industry (architects, developers, etc.)
  • Licensing and certification requirements for contractors in Tennessee

Step 2: Develop a Business Plan

A well-thought-out business plan is crucial for the success of any new business, including a construction company. Your business plan will act as a roadmap for your company’s growth and development, helping you make informed decisions and keep your business on track.

Some key elements to include in your construction company business plan are:

  • Company Overview: Describe your company’s mission, vision, and goals. Include the legal structure of your business (LLC, corporation, sole proprietorship, etc.) and your company’s name and location.
  • Market Analysis: Summarize your research on the local construction industry, including the target market, competition, and growth opportunities.
  • Services Offered: Clearly define the types of construction services your company will offer, such as general contracting, design-build, or specialized construction services.
  • Marketing and Sales Strategy: Outline how to attract and retain clients and your strategies for generating leads and closing sales.
  • Management and Organization: Detail the roles and responsibilities of your management team and any key personnel you plan to hire.
  • Financial Projections: Provide a realistic estimate of your company’s financial performance over the next few years, including projected income, expenses, and profits.

Step 3: Choose a Business Name

Selecting a name for your Tennessee construction company is essential to forming. Your business name should be unique, memorable, and reflective of your products or services. There is a complete guide on Tennessee Business Name Search for you to have a proper Tennessee construction business name. 

In Tennessee, if you do not wish to file your construction business company right away but want to hold the name that you have decided on, then you can reserve your Tennessee construction business name for 4 months. You must file a name reservation application with the Tennessee Secretary of State to keep the name. 

You can register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for Tennessee DBA (doing business as). In this manner, you can choose any name you desire for your business. A DBA allows a company to operate under the name of the person or entity who owns it. If you have decided to file for a DBA, you can file it in two methods, by mail and in person.

However, before filing a DBA, you should know that you need to renew your DBA every five years, which costs varies by county.

You can check the availability of your desired business name by searching the Tennessee Secretary of State Business Information Search‘s website.

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Step 4: Register Your Construction Company

Register your business with the appropriate government agencies before officially starting your construction company in Tennessee and obtain any necessary licenses and permits. 

Hire a Registered Agent

A Registered Agent is a person or entity responsible for receiving legal documents and official notices for your construction business. The qualifications of a Registered Agent vary depending on the jurisdiction, but generally, they must meet the following criteria:

  • Age: The Registered Agent must be at least 18 years old.
  • Residency: The Registered Agent must reside where the company is registered or authorized to do business in that state. In some jurisdictions, a domestic corporation or limited liability company (LLC) can act as its Registered Agent if it has a physical address in Tennessee.
  • Physical Address: The Registered Agent must have a physical street address, not just a post office box, where the company is registered. This is where they will receive official correspondence and legal documents on behalf of the company.
  • Availability: The Registered Agent must be available during normal business hours (9 a.m. to 5 p.m., Monday through Friday) to receive and sign official correspondence and legal documents.
  • Good Standing: If the Registered Agent is a business entity, it must be in good standing with the state and not be in default, suspended, or revoked.
  • Compliance: The Registered Agent should know Tennessee requirements and deadlines for the company, such as Annual Reports and Tennessee franchise tax filings, and ensure that the company stays compliant. 

You can serve as your Registered Agent, appoint a friend or family member, or hire a Professional Tennessee Registered Agent Services.

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File For Articles of Organization or Charter for Profit Corporation

If you form an LLC for your construction company, you must file the Tennessee Articles of Organization, which costs $300. However, you must file the Charter for Profit Corporation if you form Tennessee Corporation for your construction company. The Charter for Profit Corporation filing fee costs $100 for online and by mail filing. It is crucial to provide accurate and complete information on this document, as errors or omissions may result in delays or rejection of your filing.

  • Online Filing: Create an account/Log in to the SOS site, get the e-form, fill it, and submit online. Or get the online PDF, fill it up and upload it back on the site.  
  • Offline Filing: Send the form by mail to or drop it off in person at Corporate Filings, 312 Rosa L. Parks Avenue, 6th Floor, William R. Snodgrass Tower, Nashville, Tennessee 37243

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Create an Operating Agreement

Operating Agreement is a document that contains all of your company’s organizational details. Drafting an operating agreement in Tennessee is optional. Yet, having one as an internal document is strongly advised. 

Recommended: Creating an Operating Agreement is like having a personal legal guide at hand; it’s efficient, thorough, and ensures the smooth and compliant operation of your business. With LegalZoom’s operating agreement, it will protect your rights as an owner, keeping misunderstandings at bay and your business on the path to success. That’s why we recommend using –

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Obtain an Employer Identification Number

You must first obtain Tennessee Employer identification number (EIN) from the IRS if you will open a bank account or hire an employee for your Tennessee construction company. 

The application of an EIN in Tennessee can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

Recommended: Professional services have the EIN included in their LLC formation package. We recommend using –

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Step 5: Obtain the Necessary Licenses and Permits

Starting a construction company in Tennessee requires several licenses and permits. Some of the most common licenses and permits you’ll need include the following:

  • Business License: Your local city or county government may require Tennessee Business License. The business license fee in Tennessee ranges from $50 – $300.
  • Contractor’s License: A contractor’s license is required in most states for construction businesses that perform specific types of work, such as general contracting, electrical, plumbing, HVAC, or other specialized trades. Requirements for obtaining a contractor’s license may include passing an exam, providing proof of experience, and obtaining bonding and insurance.
  • Building Permits: Construction projects typically require permits issued by the Tennessee building department. Building permits ensure the construction project complies with local building codes and regulations.
  • Occupational Licenses: Some states may require occupational licenses for specific types of work, such as asbestos abatement, lead paint removal, or the installation of fire protection systems. Check with your state’s licensing board to determine if any special licenses are required for the work your construction company will perform.
  • Tennessee Sales Tax Permit: A sales tax permit from the Tennessee Department of Revenue allows you to collect sales tax. Currently, the Tennessee sales tax rate is 7.00%.
  • Environmental Permits: Depending on the nature of your construction projects, you may need to obtain environmental permits, such as stormwater discharge or air quality permits.

Step 6: Secure Funding

Starting a construction company requires significant capital to cover equipment, materials, and labor costs. To secure funding for your Tennessee business, you must explore various financing options and determine the best fit for your needs.

When seeking funding, be prepared to present your business plan and financial projections to potential lenders or investors. This will demonstrate your commitment to your company’s success and help build their confidence in your ability to repay the loan or generate a return on their investment.

However, consider applying for your construction company’s Tennessee Small Business Loans.

Step 7: Purchase Equipment and Materials

Once you have secured funding for your Tennessee construction company, you must purchase the necessary equipment and materials to begin operations. This may include items such as:

  • Construction vehicles (trucks, excavators, etc.)
  • Power tools and hand tools
  • Safety equipment (hard hats, safety goggles, etc.)
  • Building materials (lumber, concrete, etc.)
  • Office equipment and supplies (computers, printers, etc.)

Invest in high-quality equipment and materials, as this will help you deliver exceptional results to your clients and build a strong reputation in the industry. Consider purchasing insurance for your equipment, as this can help protect your investment in the case of theft, damage, or accidents.

Step 8: Hire a Skilled Team

Your Tennessee construction company’s success will largely depend on your team’s skills and expertise. Hire individuals with experience and knowledge in the construction industry to build a strong workforce. This may include:

  • Project managers
  • Construction laborers
  • Skilled tradespeople (electricians, plumbers, etc.)
  • Architects or engineers
  • Administrative staff (accountants, receptionists, etc.)

In addition to hiring qualified employees, invest in ongoing training and development programs to help your team stay current on industry trends, technologies, and best practices. This will improve the quality of your services and help you attract and retain top talent in the competitive construction industry.

Step 9: Market Your Construction Company

You must develop a comprehensive marketing strategy to attract clients and grow your Tennessee construction company. This may include building a professional website that showcases your services, portfolio, and testimonials from satisfied clients; creating and distributing print materials, such as brochures, business cards, and direct mail advertisements; networking with industry professionals, such as architects, developers, and real estate agents, to generate leads and referrals, and utilizing social media and digital marketing strategies to reach a wider audience and drive traffic to your website.

By consistently promoting your Tennessee construction company and showcasing your expertise and quality work, you can build a strong reputation in the Tennessee construction industry and attract a steady stream of new clients.

Benefits of Forming a Construction Company

Forming a Construction LLC is best for a start-up company since it offers the following advantages.

Limited Liability Protection

LLC provides limited liability protection to its owners, also known as members. This means that the personal assets of the LLC members are separate from the company’s debts and liabilities. In the construction industry, where accidents, property damage, and contractual disputes occur, limited liability protection is crucial to protect business owners’ assets.

Pass-through Taxation

An LLC typically offers pass-through taxation, meaning the company’s profits and losses are reported on the owner’s tax returns. This avoids the double taxation corporations may face, where the company and its shareholders are taxed separately. Pass-through taxation can lead to potential tax savings for the Tennessee construction company’s owners.

Flexibility in Management

LLCs have a more flexible management structure than corporations. They do not require a board of directors, and the owners can choose how to manage the company through member or manager management. This flexibility allows Tennessee construction companies to adapt their management structure as needed.

Simpler Record-Keeping and Compliance

LLCs still require formalities; they typically have fewer record-keeping and reporting requirements than corporations. This can save time and resources for Tennessee construction companies, allowing them to focus on their core business operations.

Credibility

Forming an LLC can provide the Tennessee construction company with increased credibility and professionalism in the eyes of clients, vendors, and financial institutions. This can be beneficial in securing contracts and building a positive reputation in the industry.

FAQs

What type of business entity is best for a construction company in Tennessee?
Limited liability company (LLC) is a popular choice for its liability protection and tax benefits.
Do I need a license to start a construction company in Tennessee?
Yes, a contractor’s license is required in Tennessee for any project whose contract price is $25,000 or more.
How long does it take to get a contractor’s license in Tennessee?
It typically takes several weeks to months to get a contractor’s license in Tennessee.
What are the general requirements to obtain a contractor’s license in Tennessee?
The general requirements include submitting an application, passing a qualifying exam, demonstrating proof of insurance, and paying the applicable fees.
How much insurance coverage is required for a construction company in Tennessee?
Tennessee law requires a minimum general liability insurance coverage of $500,000 for residential work and $1,000,000 for commercial work.
Is workers’ compensation insurance required in Tennessee?
Yes, workers’ compensation insurance is required in Tennessee for companies with five or more employees.
Can I hire subcontractors instead of employees for my construction company?
Yes, hiring subcontractors is a common practice in construction companies in Tennessee.
Are there any zoning requirements for starting a construction company in Tennessee?
Yes, zoning requirements vary by location and must be followed when starting a construction company in Tennessee.
What is the average startup cost for a construction company in Tennessee?
The average startup cost for a construction company can vary greatly but typically ranges from $10,000 to $50,000.
What taxes does a construction company in Tennessee need to pay?
A construction company in Tennessee is required to pay federal and state income taxes, unemployment tax, and sales tax.
What permits are required for starting construction work in Tennessee?
Building permits are required for all construction work in Tennessee.
What is the process for obtaining building permits in Tennessee?
The process for obtaining building permits involves submitting an application to the local government office, paying the permit fee, and obtaining approval before commencement of construction work.
What are some common construction materials used in Tennessee?
Some common construction materials in Tennessee include lumber, concrete, brick, and steel.
Are there any environmental regulations to consider when starting a construction company in Tennessee?
Yes, environmental regulations must be followed when starting a construction company in Tennessee.
Where can I find business resources for starting a construction company in Tennessee?
Business resources are available through the Tennessee Small Business Development Center or the Tennessee Department of Commerce and Insurance.
How can I find subcontractors and suppliers in Tennessee for my construction business?
Subcontractors and suppliers can be found through referrals, online directories, or local trade shows in Tennessee.
Do I need to pass a criminal background check to become a licensed contractor in Tennessee?
Yes, a background check is required to obtain a contractor’s license in Tennessee.
Can a construction company operate in multiple regions of Tennessee?
Yes, a construction company can operate across multiple regions in Tennessee.
What is the wage rate for construction workers in Tennessee?
The average hourly wage rate for construction workers in Tennessee is $17.54.
Is union membership required in the construction industry in Tennessee?
No, union membership is not required in the construction industry in Tennessee, but some companies have union agreements.
Are construction contracts required to be in writing in Tennessee?
Yes, all construction contracts in Tennessee must be in writing.
What are some common challenges in starting a construction company in Tennessee?
Some common challenges include obtaining necessary licenses, finding reliable and efficient subcontractors, and managing equipment and inventory costs.
What are some popular areas for construction projects in Tennessee?
Some popular areas for construction projects in Tennessee include Nashville, Memphis, and Knoxville.
Does training and certification matter for construction companies in Tennessee?
Yes, training and certification can provide necessary knowledge and experience to operate a construction company safely and successfully in Tennessee.
What is the average timeline for completing a construction project in Tennessee?
The average timeline for completing a construction project in Tennessee varies depending on the project’s size and complexity.
Can I hire foreign labor for my construction company in Tennessee?
Yes, foreign labor can be hired legally for the construction industry, subject to U.S. labor laws and regulations.
Is construction trading license renewal mandatory for Tennessee contractors?
Yes, construction trading license renewal is mandatory every two years in Tennessee.
Can a Tennessee contractor start working right after obtaining the license?
Yes, the contractor can start working as soon as they receive their license from Tennessee.
Is it necessary to attend classes before qualifying for a contractor’s license in Tennessee?
No, attending classes is not mandatory before qualifying for a contractor’s license.
What is the penalty for working without a license in Tennessee?
Working without a license in Tennessee can lead to civil penalties if caught, including court fees and fines.

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Conclusion

Starting a construction company in Tennessee can be challenging yet rewarding for those prepared to invest the time, effort, and resources necessary for success. By following the steps outlined in this article and dedicating yourself to providing exceptional service and quality work, you can create a thriving construction business that stands out in the competitive Tennessee market.

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