Laying the foundations: A quick-start guide to starting a construction business

Many people dream of breaking free from the 9-to-5 grind to build something of their own. 

Whether you’re a husband-and-wife team or an individual ready to take the leap, starting a construction company offers independence, potential financial rewards, and the satisfaction of shaping the world around you. But like constructing a building, starting a business requires a solid foundation.

One of the first questions new business owners ask is, “What’s the best structure for my business?” The answer isn’t one-size-fits-all. Each structure has its pros and cons, and your choice will shape everything from tax obligations to risk protection. 

This guide will walk you through the essential steps to set up your construction company, helping you lay the groundwork for long-term success.

Choosing the right business structure for construction

Think of your business structure as the blueprint for your company—it guides how you operate, grow, and manage risks. In Australia, there are four main business structures:

Sole trader: Perfect for individuals starting small, this structure is easy to set up but comes with unlimited personal liability.

Partnership: A good fit for two or more people pooling skills and resources, though all partners share liabilities equally.

Company: As a separate legal entity, a company offers limited liability and credibility, making it ideal for construction businesses aiming to scale.

Trust: A more complex option often used for family-run businesses, providing strong asset protection but with higher setup and maintenance costs.

Choosing the right structure depends on your goals, resources, and appetite for risk. Take the time to weigh the pros and cons of each option. The structure selected at the outset may or may not be appropriate throughout the business's life. The ATO is aware of this and offers various rollovers to allow businesses to restructure as they mature. A common approach in structuring is to start with a simple structure and add complexity over time to ensure the structure selected is fit for purpose.

Key considerations for structuring your construction business

Typically, new business owners are concerned about how to create the structure and keep tax bills to a minimum. A business adviser can advise you on tax rates and help you decide who pays the tax, determine whether the business involves one person or multiple individuals, and determine the cost of establishing the structure and the annual holding costs.

Tax and costs

• Company tax: A flat 25% tax rate for small businesses can make companies an attractive choice for managing profits.
• Establishment costs: A sole trader setup costs less than $500, while a company requires $2,000–$3,000 in registration and legal fees.
• Ongoing compliance: Companies have additional annual costs, such as ASIC fees and financial reporting obligations, but these are offset by their liability protection.

Risk management

As businesses mature, the focus often changes from tax minimisation, and owners ask about asset protection, risk of attack, and how to sell or hand the business over to the next generation. 

• The construction industry is inherently high-risk. A company structure offers personal asset protection, shielding your finances from potential liabilities arising from accidents, project disputes, or financial difficulties.

Take a holistic approach to determining the right structure and consider what happens if things fail. Our Risk and Recovery team is often involved in the discussion and addresses how to protect assets from attacks by creditors. They also discuss the process of closing the business in an orderly fashion at the end of its life. This team usually winds businesses down and retrieves assets, so why not include them when establishing structures, structures they find challenging to attack later on?

Building your business foundation

Setting up your construction business requires attention to both legal and industry-specific details. Once you have agreed upon a business structure, this is what you need to get started:

Essential registrations

• Obtain an Australian Business Number (ABN) and Tax File Number (TFN).
• Register for Goods and Services Tax (GST) if your turnover exceeds $75,000 annually.
• Get a Director Identification Number (Director ID) if you’re establishing a company.
• PAYG (Pay As You Go) – if staff are to be employed, the ATO needs to be informed
• FTC (Fuel Tax Credits) - Credits are available for fuel consumed by certain vehicles and for fuel used by plants not operating on roads, such as fuel used by compaction equipment, concrete mixers, and generators.
• Payroll tax – a State tax that commences after the payroll reaches a threshold
• Superannuation – each employee is required to have their employer pay their superannuation at least quarterly. From 1 July 2026, this will be payable on payday.

Industry licenses and permits

Construction businesses require state-specific licenses, such as builder or contractor licenses. Research the requirements in your area to avoid delays or penalties.

• Keep in mind that trade licenses vary not only by state but also by the type of construction and the specific trade you're involved in—for example, electrical, plumbing, or gas appliance services.
• In NSW and the ACT, companies and partnerships that contract, sub-contract, or advertise to do residential building, trade, or any specialist work need to be licensed and have a qualified supervisor for the work.

Insurance

• Insurance is a non-negotiable for construction businesses. Ensure you have:
• Public liability: Protects against property damage or personal injury claims.
• Workers’ compensation: A State-by-State insurance policy to be taken out when a business employs staff. Contractors may need to be considered in annual declarations. Importantly, sole traders are not covered by Workers Compensation, nor are partners in a partnership.
• Contract works: Covers construction sites and projects.
• Personal insurance: Various types – such as income protection, total and permanent incapacity, death, keyman.
• Business insurances: Various types – plant and equipment including third party, public liability, products, business interruption and continuity, employee dishonesty cover, goods in transit, machinery breakdown, stock deterioration, theft, professional indemnity.
• Management liability: Covers director and officer liability, employment practices, government fines, tax audits, cyber security. 

Additional registration considerations

• Apprenticeships – where apprentices are to be employed, a service provider is required to establish a contract between the employer and the Australian Apprenticeship Board
• Long Service Leave: In the Building & Construction Industry – registration is required by the employer. Each State is slightly different. In NSW, the employer is required to file an annual return, and no levies are paid as they are paid through Development Applications. However, in the ACT, the employer is required to pay a levy.
• Registrations for work to be performed with Government Departments – e.g., in the ACT, a Secure Local Jobs Code Certificate is required where a contractor is engaging with the ACT Government

Safety and compliance should be a top priority

Safety is more than a legal requirement—it’s a promise to your clients and team. Here’s how to stay compliant and build trust:

• Develop a comprehensive workplace health and safety (WHS) plan tailored to your operations.
• Train all employees in equipment use, hazard identification, and emergency protocols.
• Stay informed about zoning and environmental regulations affecting your projects.

Making safety a priority not only protects your business from legal troubles but also enhances your reputation. Final thoughts (and a final keyword) for your last heading

Practical tips for new construction business owners

Starting a construction company involves more than paperwork—it requires strategy and foresight. Here are some tips to hit the ground running:

• Start small and build up: Focus on smaller, manageable projects to establish credibility before taking on bigger contracts.
• Invest in tools and technology: High-quality equipment and modern construction management software can save you time and money.
• Network for success: Build relationships with reliable subcontractors, suppliers, and other industry professionals.
• Market smartly: Create a professional website, engage on social media, and advertise locally to reach your target audience.
• Hire the right team: Skilled, safety-conscious workers are your most valuable asset. Choose carefully and invest in their development.    

Starting a construction company is both exciting and challenging, but with careful planning and the right approach, you can lay a strong foundation for success. Choose the right business structure, prioritise safety and compliance, and focus on building a solid reputation. With the right tools and strategies, your construction business can grow into something extraordinary.

FOR MORE INFORMATION

For more information about business structures or starting a business, reach out to your local RSM Adviser.