All Forum Posts by: Chris Burns

Thanks for the heads up, PJ.  Good to know to be wary.

Hi folks, I am about to launch into a large rehab project. I own the house. Will be fixing some structural, adding sq footage, updating everything, etc. 

While I know BP is primarily about RE investing, this question is more about whether I should form an LLC or not.

I plan to be my own General Contractor for the job. To do so where I live I will have to have proper insurance and licensing. I can get those fairly easily just takes some time, which I have.

As GC, I will sub out the first phase of the project to a first tier contractor who will then sub a few other jobs (e.g., brickwork, excavation, roofing) while they do carpentry, framing, structural. Once they finish a weathertight shell, I'll take over and finish work on the interior that I can do myself or sub where I can't.

What are the pros/cons of forming my own LLC as the GC (with myself as the sole member, and also the sole customer)?

One benefit area is potential tax deductions. At the very least I can get tax deductions for the formation and licensing costs. 

I would run sub invoices and payments through the LLC to me as the customer at cost, so the LLC wouldn't be generating any profit or loss otherwise.

Are the liability benefits really worth it if I am the sole member? 

Is there any other benefit I'm not thinking about?

Other than the administrative burdens of setting it up, and formation costs, are there other drawbacks that I should be aware of?

Or am I complicating this and I should just get the licensing and liability insurance under my own name and skip the step of forming a company. 

Any advice you may be able to provide is much appreciated!

Best,

Chris

Thanks, Camile and Chris!

Hoping to hear from some folks in Philadelphia who have specific contractor references, as well!

Hi Joe, thanks for the insight and for bringing up the point about hard money lending, which I wasn't thinking about.

For now, I'm not planning on any hard money lending. This is for property that I already own, and others that I will fund with my own cash in the future. So, I'm hoping I'm in the clear as long as they are existing one- or two-family dwellings. 

If I were to go beyond that though, to 3-family or larger, or consider outside funding sources then it seems like yes, I would have to go the route of fully-licensed contractor for keeping this above water. Good points!

Hello BP Forum!

I am interested to learn more about the process to become my own General Contractor in Philadelphia for investment rehabs which are single family or two-family units that I own, and would like to get your advice and opinions on some of the choices involved.

Per the L&I web site, I understand that I should register as Home Improvement Contractor and have a Commercial Activity License:

So in this case, I wouldn't need to be a full-fledged licensed Philadelphia Contractor, correct?

Thus my questions are:

• Would you advise forming an LLC for my contracting "business" which will not have any customers to start other than myself. Or would a sole proprietorship work better? I am primarily concerned about optimizing for tax benefits here rather than customer liabilities. However I should be concerned about vendor liabilities, which brings me to my next question.
• What kind of insurance would I need to have?
  • The requirements for a licensed Philadelphia Contractor include $500k general liability, $300k automobile, and $100k/$100k workers comp accident/employee and $500k total policy limit
  • Would I need all of these? I don't plan to have my own business automobile. 
  • And wouldn't I want to shift the worker's comp burden onto any sub contractors I hire, thus meaning that I really should only carry general liability insurance?

Any other advice or concerns you think I should be aware of?

Thanks in advance!

Chris

Hello,

I'm looking for references for contractors who would be able to help me complete an investment rehab in center city. I own a 3 story rowhome that needs some structural repairs and I also plan to put an addition on to expand the floorplan. I have plans and PHC approvals. The thing is that I want to find a contractor who would be willing to take on the first phase of work - the heavy construction work - to get the project to a point where we have a weatherproofed 'shell' of the building, ready for all the interior framing, systems, finishes, etc.. I want to take over the GC role from that point to move the project forward to completion.

Looking forward to hearing any suggestions or references you may be able to provide. 

Thanks!

Chris