What Virginia expects from a new trade business

Over $1,000 and you need a contractor license

The Board for Contractors (under DPOR) licenses by job size:

• Class C: over $1,000 and under $30,000 a job, under $250,000 in 12 months.
• Class B: $30,000 to under $150,000 a job, or $250,000 to under $1 million in 12 months.
• Class A: $150,000 or more a job, or $1 million or more in 12 months.

Electrical, plumbing and HVAC contractors also need a master tradesman license as a condition of the contractor license. The firm holds the license, not the individual.

Contracting or even bidding without the right class is a Class 1 misdemeanor, with a fine of up to $500 a day. An unlicensed contractor generally can't enforce the contract, unless they performed substantially in good faith and didn't actually know a license was required. Don't count on that.

Home jobs: the Board requires a written contract signed by you and the customer before work or payment. It must state start and estimated completion dates, total cost, payment schedule and down payment, specified materials and work, a delay clause, permit compliance, cancellation rights, the customer's signed acknowledgment of the Board's statement of protection, your name, address, license number and class, that changes must be written and signed, and the Recovery Fund notice. Hand over a signed copy before starting.

Sold at the customer's home, unasked? Use the buyer's right-to-cancel statement. The buyer can cancel until midnight of the third business day after signing, and you refund within 10 days. A construction attorney can look over your contract.

Source: Code of Virginia 54.1-1100 · Code of Virginia 54.1-1103 · Code of Virginia 54.1-1115 · DPOR Board for Contractors · 18VAC50-22-260, prohibited acts and residential contract terms · Code of Virginia 59.1-21.3 (home solicitation cancellation) · Code of Virginia 59.1-21.4 (cancellation statement) · Code of Virginia 59.1-21.5 (refund)

Who to call: an attorney near you

Comp starts at three employees, and the penalty is daily

Virginia's comp law leaves out employers with fewer than three employees regularly in service in the same business, unless they elect in. At three, you're in.

A sole proprietor, the only member of a one-member LLC, the only shareholder of a corporation, or all partners together aren't counted as covered unless they elect in and notify the insurer. An executive officer who isn't paid a regular salary and rejects coverage isn't counted toward the three.

Going without when you're required to carry it: a civil penalty up to $250 a day, capped at $50,000, and the worker can sue you. Subs matter too. If you hire out part of your own trade work, you can be liable for comp to that sub's workers. An insurance agent who writes contractors can tell you how your count and your subs add up.

Source: Code of Virginia 65.2-101 · Code of Virginia 65.2-302 · Code of Virginia 65.2-805

Who to call: an insurance agent near you

Getting paid: 90 days, counted from the end of the month

Virginia's lien covers work of $150 or more.

• File: record your memorandum with the clerk no later than 90 days from the last day of the month you last worked or supplied, and never later than 90 days after the building is completed or the work otherwise ends. It's unclear whether completed means your part or the whole job, so the safe count is 90 days from your last day of work or the day the job ends, whichever is earlier.
• Hired by the owner: mail a copy and file a certification of mailing with it.
• Look-back: a memorandum can't include work done more than 150 days before your last day, apart from retainage.
• Subs: do all of that and give the owner written notice. A sub's sub notifies the general contractor too. You only reach what the owner owes the general contractor when you give notice, so give it early.
• Lien agent: on a one- or two-family home with a lien agent named on the permit, notify the agent within 30 days of first work, or of the permit if you started earlier. Late notice limits your lien to work from the notice date on.
• Sue: within 6 months of recording or 60 days after completion, whichever is later.

A sub or supplier can also make an owner or general contractor personally liable by sworn notice within 30 days after the job ends.

Advance lien waivers in a contract are void. No right license or class, no lien. A construction attorney can set up your forms.

Source: Code of Virginia 43-3 · Code of Virginia 43-4 · Code of Virginia 43-4.01 · Code of Virginia 43-7 · Code of Virginia 43-17 · Code of Virginia 43-9 · Code of Virginia 43-11

Who to call: an attorney near you

Every contractor is the consumer of the materials

Virginia's rule is blunt: a contractor is the user or consumer of what you furnish on real estate work, prime or sub. Materials that become part of the building are treated as used up by you. Your supplier collects the tax from you, and you don't buy for resale on those jobs. If you buy without paying tax, you remit use tax yourself.

The customer doesn't change it. There's no exemption because the job is for a government agency, a nonprofit school or hospital, or because it's cost-plus. So the tax goes into your price, and you pay it up front.

Things get different if you also fabricate goods or sell from inventory. A CPA who works with contractors can sort out that split.

Source: 23VAC10-210-410, Contractors respecting real estate

Who to call: a CPA or tax pro near you

LLC, sole proprietor, or S-corp?

Articles of organization cost $100 at the State Corporation Commission. Every year after that, the LLC owes a $50 registration fee, due by the end of your anniversary month. Ask the Commission what a late payment costs. No franchise tax and no publication.

Pass-through profit lands on your personal Virginia return, where the top rate is 5.75% on income over $17,000. Most of a working contractor's profit will sit at that rate.

When an S-corp election starts paying is a numbers question. Bring what the business clears after your floor rate to a CPA and ask them to run it.

Source: Code of Virginia 13.1-1005 (fees) · Code of Virginia 13.1-1062 (annual fee) · Code of Virginia 58.1-320 (income tax)

Who to call: a CPA or tax pro near you