New To The Business..have A Couple Questions.

wfg

Hi. My husband and I are new to the construction business and have our first job. We are excited, but the organization we am doing the job for is taking us through the ringer. I just want to clarify a few things..

1) On a commercial job, can I ask them to pay me a percentage of the total job cost up front (to pay for materials, etc)? I know you can only charge $1000 max for residential, but does this apply to commercial jobs too?

2) Do most contractors stipulate that work is to be "substantially complete" in their contract? The client is stating that they want the work to be 100% complete before payment is made.

3) We don't have our contractor's license yet, but are entering into a limited partnership with someone who does for this particular job. Does anyone see any red flags for us there?

480sparky

Local & state laws may apply for your area, but you can certainly require anything you want. Whether the other party agrees to it is another matter.

My contracts are basically billed after final inspection, substantially complete or not.

Get everything in writing. I've heard it said that the only ship guaranteed to sink is a partnership.
Good luck, and welcome to the forum!

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thom

Let's start with number 3. What you are doing is a BIG RED FLAG to any prospective clients and associates. A limited partnership is a legal entity that exists separate from the individuals in it. It will need to be created, you will need the proper tax id's and it will need its own license. What you are trying to do is avoid the law, that will only dig you a hole. This entity as you are trying to establish it, would not be licensed, you would be functioning in violation of the law, and the customer may have no obligation to pay you.

The only way for this to work is for your friend to sign the client on his contract, run it on his license, checks go into his bank account, and, maybe he will give you some money at the end.

Then number 1. Commercial work generally works on the contractors dime. If this is a job that will take a few months or more, you can probably get percentage of completion billing. This means, at the end of the month (March) you bill for the work completed in March. Get that bill to them by April 15th and you should get paid around May 15th for the March work. If you can't finance the job you aren't financially qualified to do the job.

You can put anything you want in the proposal. The customer can tell you where to stick that proposal in any place they want.

simplejack

I'm a Commercial Contractor, all my Jobs are started WITHOUT a deposit required Upfront, Typically I'll bill 50% at the start of a 6 week project, and stipulate that I will receive my 50% at the time of Rough Inspection signing.

Then I bill 50% due upon Final inspection (and Certificate of occupancy) I don't like deposits or Retainers...for me It just adds to more Paper work and believe it or not results in LONGER payment times! (if I break it up to 4 payments instead of 2, because of the Clients billing cycles) and this is done on any job under $150,000.

Larger Jobs Require a different protocol, but then again will last longer than 6-8 weeks...

Consider you material costs, your overhead and reserve, and how well or likely you will get paid on time when figuring out your deposit...

As for your Partnership...quickly work on getting your License, and be careful, treat it as STRICTLY Business ESPECIALLY if it's with a Friend! get everything in writing BEFORE the fact and communicate very clearly about everything... friendships get ruined all the time over Money!

GOOD LUCK!

Chris Johnson

Your in California right? I'm guessing because of the $ 1000.00 down payment you are citing.

Well, you have broke the law already...you bid on a job without a contractors license, if you get caught you will be subject to a long delay if and when you apply and if you have applied it will be put in suspension for a while. You could be fined and jailed as well, but I would say that is the least of your concerns right now, I would be more scared of a delay in getting my license if I were you.

If you are licensed (let's pretend)

The $ 1000.00 or 10% threshold does not apply, you could receive 100% up front before starting, there is no law.

Good Luck getting a deposit on commercial work, I always invoice on the day we start a 'Mobilization' draw for a pre-agreed upon amount, I see it 14-30 days after we start. Depending on the project and it's financing they will tell you when draws are available and you do progress draws which generally includes completed operations and materials delivered to the site.

LLC's are not allowed in California contracting, your either sole prop., partnership or corporation or JV, you can't have a sole prop or JV...you have no license, I believe you could do partnership under the licensed company provided it is disclosed to the CSLB or you could buy shares in the licensed corp again with disclosure to the CSLB.

I suggest you try and retract your original bid...meaning get the paperwork back that you submitted and if you can, re-submit under the licensed contractors name and number.

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Chris