Module 1: Choose Your Entity Structure

For a solo government contractor, a single-member LLC is the default choice. Here is why.

An LLC gives you personal liability protection without the overhead of a corporation. Your personal assets (house, savings) are separated from business liabilities. If a contract dispute or audit goes badly, the LLC is the entity that owes, not you personally.

The alternatives and when they matter:

Sole proprietorship: Zero liability protection. Never do government contracting as a sole proprietor. One bad contract dispute and your personal assets are exposed.

S-Corp: Same liability protection as an LLC, but with mandatory payroll (you must pay yourself a "reasonable salary" via W-2). Adds $2,000-5,000/year in payroll administration costs. The tax savings only kick in when your net profit exceeds roughly $60,000-80,000/year. Pre-revenue or early-revenue contractors should not be an S-Corp.

C-Corp: Double taxation (corporate tax + personal tax on dividends). Only makes sense if you plan to raise outside investment or go public. Government contractors almost never need this.

Partnership LLC: If you have a co-founder, a multi-member LLC with a proper operating agreement works. Make sure the operating agreement addresses government contract-specific issues: who signs proposals, who is the responsible party for compliance, and how set-aside certifications are maintained.

The bottom line: start as a single-member LLC. You can always elect S-Corp taxation later (via IRS Form 2553) when your revenue justifies the payroll overhead. You cannot easily undo an S-Corp election.

Every business advice article tells you to incorporate in Delaware. For government contractors, that advice is usually wrong.

Register in your home state. Here is why:

If you operate in Florida and incorporate in Delaware, you still have to register as a "foreign LLC" in Florida and pay Florida annual fees. You are now paying two states instead of one, plus a Delaware registered agent ($100-300/year).

Delaware advantages that do NOT apply to small government contractors: - Sophisticated corporate case law (irrelevant unless you have complex shareholder disputes) - Privacy protections (SAM.gov requires your real address anyway) - No state income tax on out-of-state revenue (Florida already has no state income tax)

Wyoming advantages that do NOT apply: - Asset protection (LLCs already provide this) - No state income tax (again, Florida already has none) - Low annual fees ($60/year, but you still pay your home state too)

When Delaware or Wyoming DO make sense: - You have investors who insist on Delaware (VC convention) - You operate in a high-fee state and have no physical presence there - You need Series LLC structure (Wyoming offers this)

For the typical 1-person IT contractor in Florida: form in Florida via Sunbiz.org. Annual report is $138.75/year. Done.

SAM.gov requires your state of incorporation. Contracting officers do not care whether it is Delaware or Florida. They care whether your registration is active.

A registered agent is the person or company designated to receive legal documents (lawsuits, state notices, tax correspondence) on behalf of your LLC.

Every state requires a registered agent with a physical address in that state. You have three options:

Option 1: Be your own registered agent (free). Use your home or office address. This works if you are always available during business hours to accept service. Downside: your home address becomes public record.

Option 2: Use a registered agent service ($100-300/year). Companies like Northwest Registered Agent, Incfile, or LegalZoom will be your agent. They forward documents to you. This keeps your home address off public records and ensures someone is always available to accept service.

Option 3: Use your attorney or CPA (varies). If you have an existing relationship, they may serve as your registered agent.

For government contractors, one consideration matters more than others: your registered agent address appears in your SAM.gov registration. If you change agents or addresses, you need to update SAM.gov within 30 days, and the update takes 7-10 business days to process. During that time, your registration may show as "inactive" which can delay contract awards.

Recommendation: start as your own agent (free), switch to a service when you want your home address off public records or when you start traveling frequently.

Your entity structure directly affects which small business set-aside programs you qualify for. This is not theoretical -- it determines which contracts you can bid on.

WOSB (Women-Owned Small Business): The business must be at least 51% owned AND controlled by one or more women. "Controlled" means the woman makes day-to-day management decisions. If a husband owns 50% and a wife owns 50%, this does NOT qualify. If the wife owns 51% and is the managing member in the operating agreement, it qualifies.

SDVOSB (Service-Disabled Veteran-Owned Small Business): The service-disabled veteran must own at least 51% and control day-to-day operations. The veteran must have a service-connected disability rating from the VA.

8(a) Business Development: The applying individual must be socially and economically disadvantaged, own at least 51%, and control the business. Note: 8(a) admissions have declined dramatically due to recent program reforms. Do not build your strategy around getting 8(a) certification.

HUBZone: The business must be at least 51% owned by U.S. citizens, have its principal office in a HUBZone, and at least 35% of employees must reside in a HUBZone. Entity structure affects whether the "principal office" test is met.

Key operating agreement clauses for set-aside eligibility: - The qualifying individual must be named as the managing member - The operating agreement must grant that individual authority over day-to-day operations - Voting rights must reflect at least 51% control by the qualifying individual - Distribution rights should align with ownership percentages

If you plan to pursue any set-aside certification, have your operating agreement reviewed by an attorney who specializes in SBA regulations BEFORE you file it with the state. Fixing an operating agreement after certification denial is more expensive than getting it right the first time.