Business Foundations for Virginia Contractors

📘 Lesson 1.1: Types of Business Ownership

Sole Proprietorship

• Definition: A business owned by one person.

• ✅ Simple to form

• ✅ Income reported on personal tax return

• ❌ No liability protection — personal assets are at risk

Partnership

• Definition: A business owned by two or more people.

• Types:

• General Partnership (equal liability and control)

• Limited Partnership (investor partners only liable for their investment)

• ✅ Shared capital and workload

• ❌ Shared liability and risk of disputes

Limited Liability Company (LLC)

• Definition: Hybrid structure that combines liability protection with pass-through taxation.

• ✅ Limited personal liability

• ✅ Flexible taxation

• ❌ Must register and pay fees to SCC annually

Corporation

• C-Corp: Separate legal/tax entity; subject to double taxation

• S-Corp: Pass-through taxation; must meet IRS requirements

• ✅ Good for raising capital

• ❌ Heavier regulation and paperwork

📘 Lesson 1.2: Virginia Contractor Licensing Overview

Contractors in Virginia must be licensed through DPOR (Department of Professional and Occupational Regulation).

A. License Classes

• Class A: No monetary limits; requires net worth of $45,000, 5 years of experience, and passing the 8-hour exam.

• Class B: Up to $120,000 per project or $750,000 annually.

• Class C: Up to $10,000 per project or $150,000 annually.

B. Designated Employee

• A person who takes the exam and represents the company’s qualifications.

• Must pass the required exams and have experience in the field.

C. Business Entity Registration

• Must register your business with the Virginia State Corporation Commission (SCC).

• Required before DPOR will issue a license.

📘 Lesson 1.3: Roles Required for Licensing 

Responsible Management

• Legal owner/officer listed on the license

• Accountable for regulatory compliance

Qualified Individual (QI)

• Has technical knowledge and field experience in the specialty

• Class A: 5 years of verified experience required

Designated Employee (DE)

• Must pass the DPOR exam

• May be the same person as the QI or RM (but not always)

📘 Lesson 1.4: Tax and Compliance Basics

• EIN (Employer Identification Number): Required for LLCs, corporations, and anyone with employees

• Sales Tax: Contractors generally pay sales tax on materials unless functioning as retailers

• Self-Employment Tax: Applies to sole proprietors and LLCs taxed as disregarded entities

• Business Registration: All businesses must be registered with the State Corporation Commission (SCC)