Another area that might be overlooked is a qualified retirement plan. An attractive retirement plan can serve a dual purpose: offer deductions for the company and serve as a vital recruiting tool and an enticement to keeping key field folks. There are many different types of plans available and a building-specific CPA firm can recommend which ones might be better suited to the construction industry than others.
QIs having employees vs. using all subcontractors better for a
builder? If so, why? And when using either, what must a builder keep track of for each?
There are advantages to both systems and the builder must make informed decisions. Contractors with their own employees can better control the job schedules, benefit from increased job performance through employee loyalty, and build a team of workers who work for the good of the company. In some cases, the contractor will inspire key employees to excel by offering transitional planning towards a buyout of the company. Contractors must follow federal guidelines for costs such as unemployment insurance, workers comp insurance, health insurance, and state and local tax withholdings.
Using subcontractors turns all job overrun risk and employee issues over to the subcontractor. Typically, lower margins per job result from the use of subcontractors. However, contractors must be aware that simply paying someone through accounts payable instead of through payroll does not qualify them as a subcontractor. Contractors should work closely with their CPA to ensure that the federal guidelines governing the relationship of employee or subcontract is being strictly followed as there are harsh penalties for treating an employee as a subcontractor.
Rhonda Gilbert (president), Tom Savage (partner), and Gary Fortier (partner), share a unique passion for equipping contractors for business success. As certified public accountants (CPAs) with a special niche for construction-based businesses, they are a power team of expertise that helps Georgia builders realize their fullest business potential.
Have a business question you would like to see featured in our Builder Business Roundtable Q & A? Please email us at: email@example.com.