I started a construction company about 5 years after I started flipping houses full time. As part of this I did get licensed as a general contractor through my state. There were a few reasons why I did this:
1) One of the local municipalities stopped allowing LLCs to pull permits as the homeowner.
2) The real estate market around here was really hot and I would often have numerous offers on my rehabs. Many Realtors and potential buyers started asking if I could renovate their homes since they were priced out of buying my rehabs. I realized that this was an opportunity to diversify my income streams. If the real estate market was to cool I wanted to have the option to have a safety net that offered the opportunity for another type of active income. Even if houses aren't selling people will still want renovations to be done to their homes.
3) As my rehab projects grew bigger and bigger there were more questions/concerns from insurance providers because there were no licensed general contractors working on the projects.
4) I legitimately LOVE residential construction. I wish I had gotten into the industry 20 years ago because I feel like I could have learned and done so much more by now.
As others have mentioned earlier you need to consider some more things before you decide to start your own construction company:
1) state/local licensing and the fees that go with that (the more you make the more the government takes)
2) insurance - general and professional liability insurance for GCs is EXPENSIVE!!!
3) liability
4) do you hire employees? W2 employees require a LOT more paperwork, insurance, and benefits compared to 1099 subcontractors. And don't think that you can hire someone simply as 1099 and then treat them like they are W2. If you get caught by your state/local overlords you could get in big trouble and pay fines. I've seen it happen to others.
The tax question posed by the OP should be asked specifically to his CPA. It will vary depending on your individual situation.
