Construction Business Compliance Checklist

Get Licensed Before You Bid

Most states require a contractor's license once a project's value crosses a set dollar threshold, and the specific amount, the trades covered, and the exemptions all vary by state licensing board. California is a useful example of how specific this gets: its "minor work" exemption covers jobs with an aggregate contract price under $1,000, but that exemption doesn't apply if the work is part of a larger project or if a job is split into smaller pieces to stay under the threshold, per the California Business and Professions Code. Check your own state's contractor licensing board for its specific threshold, trade classifications, and any exam or bonding requirement before you bid on a job.

Register the Business Entity Itself

A contractor's license is separate from forming your business entity. Form your LLC or corporation in your home state, and if you take on jobs in another state, check whether that state requires foreign qualification in addition to its own contractor licensing requirement; a construction business that regularly works across state lines often needs both.

Carry Workers' Compensation Insurance

Construction is a physically demanding industry, and nearly every state requires employers, including contractors with even one employee in some states, to carry workers' compensation insurance. Texas is a notable exception, where coverage is optional for most private employers, though non-subscribers face specific notice requirements if they opt out. Confirm your own state's requirement and any construction-specific rule, since some states set a lower employee threshold for construction trades than for other industries.

Keep OSHA Injury and Illness Records

Employers with more than 10 employees generally must record work-related injuries and illnesses using OSHA Forms 300, 300A and 301, and construction is not on OSHA's list of partially exempt industries, unlike some retail and service businesses. Record a qualifying case within 7 calendar days of learning about it, retain the records, and post the 300A summary each year between February 1 and April 30. Beyond recordkeeping, OSHA's construction standards (29 CFR 1926) set specific safety rules for fall protection, scaffolding, excavation and other hazards common on job sites.

Register for Sales and Use Tax on Materials

Contractors often owe sales or use tax on the materials they purchase, even when the finished project itself isn't directly taxed, and the specific rule depends on whether your state treats a contractor as the final consumer of materials or as a reseller. Register with your state's revenue agency and confirm how it classifies construction materials before you assume a project is tax-exempt.

Watch for Prevailing Wage Requirements

The Davis-Bacon Act requires contractors and subcontractors on federally funded or assisted construction contracts over $2,000 to pay locally prevailing wages and fringe benefits, with additional overtime protections on contracts over $100,000, according to the Department of Labor. Many states have their own "little Davis-Bacon" laws that apply prevailing wage rules to state-funded construction even when no federal money is involved; check your state's labor agency if you bid on public projects.

Follow Your State's Mechanics Lien Notice Rules

If you're not paid for work or materials, a mechanics lien can secure your right to payment, but most states require a preliminary notice sent within a specific window, often before work even starts, to preserve that right later. Miss the notice deadline in your state and you can lose lien rights even if the underlying debt is valid, so build this into your project paperwork from the start rather than only after a payment dispute arises.

Keep Your Registered Agent and Annual Filings Current

A construction business that's registered in multiple states needs a registered agent in each one and has to track each state's annual report deadline separately. LLC Register's $99-a-year registered agent service includes annual report filing, which can help a multi-state contracting business keep each state's filing on schedule rather than tracking them one by one.

Licensing Thresholds Are Easy to Misjudge

The temptation to treat a project as "minor work" to avoid licensing requirements is a common and risky shortcut; most states' exemptions are narrower than they first appear; splitting a larger job into smaller invoices to stay under a dollar threshold typically doesn't work and can itself be a violation. When a project's scope is close to your state's threshold, confirm with the licensing board rather than assuming the exemption applies.

Multi-State Contractors Face Multiplied Compliance

A contractor working in more than one state is tracking separate licensing boards, separate workers' compensation rules, and potentially separate prevailing wage laws for each state, not just one set of federal rules. Build a state-by-state compliance list rather than assuming your home state's rules travel with you.

Safety Recordkeeping Protects You in a Dispute, Not Just an Inspection

OSHA records aren't only relevant if an inspector shows up. Accurate injury and illness records, along with safety training documentation, can matter in a workers' compensation claim or a liability dispute long after the fact, so treat recordkeeping as routine business practice rather than a compliance task to rush through once a year.

This Isn't Legal, Tax or Safety Advice

Contractor licensing categories, prevailing wage calculations, and OSHA standards are detailed and change over time. Talk to your state's licensing board about your specific trade classification, a tax professional about how your state taxes construction materials, and a safety consultant or attorney about OSHA compliance specific to your job sites.