The leap: how a Latino contractor business grows

Many Latino businesses start with great skill and a dream. A cook opens a restaurant, an electrician starts his company, a cleaner launches her service. They do the work better than anyone.

But then they stall. They work more, don't earn more, and can't grow, because the business depends on them for everything. This article is for owners of construction, landscaping, and service businesses who want to make the jump from "doing the work" to "running the business."

It is a general, informational reflection, not a promise of results. Every business is different.

In short

• Making the leap means going from technician to manager and then to leader.
• Formalizing the business and separating the money helps with organization, but legal protection depends on your case.
• Understanding taxes, payroll, and worker classification helps you avoid problems. Confirm with a professional.
• Learning to read your numbers and to delegate helps you grow.
• Mentors and continuing education make the difference.

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From doing the work to running the business

Growth calls for a change of role. The owner stops being just the best technician and becomes a manager. Over time, a leader too.

Example: a flooring contractor who installs everything himself has a ceiling: his hours. When he builds a team and checks their work, he can take on more projects without losing quality.

1. Formalize the business

Many successful businesses stop being "Juan the painter" and register as a company. For example, an LLC. They also open separate bank accounts.

On protection, the SBA explains how to launch your business and recommends talking to counselors and attorneys. The structure you choose affects your taxes and how much of your personal assets may be at risk. An LLC can help separate your personal assets from business debts, but it is not a guarantee. It depends on how you maintain it and on your case. If you have questions, talk to an attorney.

2. Understand the U.S. rules

Growing requires knowing the basic rules:

• Taxes: understand what you are paying, such as sales tax, payroll taxes, and income tax. Your tax preparer, CPA, or enrolled agent explains what applies to you.
• Workers: if you pay someone, the question is whether they are an employee or an independent contractor. The IRS uses tests of behavioral control, financial control, and type of relationship, and the label you give the worker does not decide the case. California also uses other tests. Confirm with an attorney or the agency.
• Workers' compensation: insurance for on-the-job injuries. In California, the DIR explains the information for employers. Ask your insurance agent or the DIR what applies to your business.
• Finances: learn to read your profit and loss report (P&L). An organized business history can help you when you apply for credit.

3. Learn to Delegate

Your job becomes making sure the team does the work right, on time, and at a profit. This takes trusting others, creating written systems, and accepting that no one will do it exactly like you.

Barriers and education: what many Latino owners face

Many owners mention challenges like language, distrust of the system, or a lack of mentors. See the U.S. Chamber of Commerce analysis of growth challenges for Latino-owned businesses (in English).

What helps: learning continuously, surrounding yourself with mentors and seeking out professionals who know more than you in each area. It is a path, not a formula.

What to do now

• Write down which tasks you do that someone else could do.
• Separate your personal account from the business account.
• Ask your tax preparer to explain your business taxes to you.
• If you pay someone, check with a professional whether they are an employee or a contractor.
• Ask your insurance agent about workers' compensation.
• Find a mentor or a group of business owners.

When to talk to a professional

Talk to an attorney about your structure and contracts, and to a tax preparer, CPA, or enrolled agent about taxes. For insurance, your agent. These topics depend on your case and your state.

How ODC helps you

At ODC we keep your books (bookkeeping) up to date and support you with business consulting. Learn about our bookkeeping service. You can also read the art of selling and delegating.

Taxes, payroll, and legal matters are handled by independent partners.

References

1. SBA: Launch your business — guide to launching and formalizing a business.
2. IRS: Independent contractor (self-employed) or employee? — criteria for classifying workers.
3. California DIR: Employer information, workers' compensation — information for employers.
4. SBA: Choose a business structure — how structure affects taxes and personal risk.
5. U.S. Chamber of Commerce: Latino-owned business growth challenges — growth challenges (in English).

This article is for information and education only. It is not legal, tax or bookkeeping advice. We are a bookkeeping service: for tax matters, consult a tax preparer, CPA or enrolled agent.