Starting a metal fabrication business means registering the company and getting an EIN, equipping the floor for the cutting, forming, and welding you will sell, writing hot-work and guarding procedures before the first job, qualifying your welders to the codes customers name, and insuring the shop and its installed work.
Nothing on this page is legal or tax advice, and rules for forming and registering a business differ by state and city, so run the entity, tax, and permit steps past an attorney and a CPA who know your location. The sequence below covers the federal sources that apply to a new fabricator and the insurance choices that follow from each step.
Pick the fabrication work you will sell
Fabrication covers a wide range of businesses. A structural shop cuts, drills, fits, and welds beams and columns and may erect them. A miscellaneous and ornamental metals shop builds stairs, railings, gates, and canopies and may install them. A sheet metal shop shears, bends, and assembles enclosures, panels, and brackets. A repair and custom welding shop takes one-off jobs, some of them in the field.
Decide which of these you are before you spend on equipment, and be honest about the mix. A shop that plans to stay in the building has a different risk than one that sends a crew and a rig to a customer’s plant or a construction site, and the difference shows up in the equipment list, the training plan, and the insurance program. Write the mix down in a paragraph you can hand to a lender, a landlord, and an insurance agent, and update it when the business changes. The answer tells you which machines to buy first, whether you need a truck-mounted rig, which welding codes your procedures must meet, and whether your liability program has to account for installed work. If you will also machine parts to print, our guide to starting a machine shop covers the machining side of the same start-up.
Paperwork: entity, state filing, and the EIN
The U.S. Small Business Administration’s launch guide puts the steps in this order: choose a structure for the company, file with the state, obtain a tax ID, and apply for whatever licenses and permits the work calls for. Where a federal agency regulates an activity, the SBA says the business must hold that agency’s license or permit; confirm none of your planned products or services sit under one. Sign the lease, the equipment finance agreement, and your first customer contracts in the company’s name once it exists, not before.
Your federal tax ID is an Employer Identification Number. Apply for it on the IRS’s own EIN page; the IRS says an EIN never costs a fee, so ignore any site that asks for payment. Keep the confirmation with your formation documents, since the EIN goes on bank, customer, and insurance paperwork.
Equipment for a first fabrication floor
A first fabrication floor can be built around a way to cut, a way to form, and a way to join. Cutting can mean a saw, an ironworker, a plasma table, or a shear. Forming usually means a press brake and, for curved work, rolls. Joining means welding power sources suited to the processes and metals you will run, plus fixtures and a welding table flat enough to hold tolerance.
Fit the building to the equipment. Check electrical service for the welders and the plasma table, floor capacity for the brake, crane or forklift access for plate and structural stock, and exhaust for the welding area. Plan storage for plate, sheet, tube, and structural shapes as carefully as the machines: racks rated for the load, clear aisles for handling, and a separate area for finished work waiting to ship. Keep a schedule of every machine with serial numbers and values from the day it arrives; the property and manufacturing machine and equipment coverage you buy is written from that list. If the business will work on customer sites, list the mobile rig and its tools separately, because equipment that travels is insured differently from equipment bolted to your floor.
Hot work rules from OSHA Subpart Q
Welding, cutting, and brazing in general industry are governed by 29 CFR 1910 Subpart Q, and its general requirements in § 1910.252 are written around fire. When the object to be welded or cut cannot readily be moved, all movable fire hazards nearby must be taken to a safe place, and a fire watch must be kept for at least a half hour after welding or cutting ends. The same section requires that the area be inspected before cutting or welding is permitted, with precautions set out preferably in a written permit.
Build a written hot-work permit into your procedures from the first week. It protects the crew, and it is also the document an underwriter asks to see when a fabricator works in customers’ buildings, where a spark can become a claim against your general liability rather than a loss to your own property. Train everyone who strikes an arc or runs a torch on it, and keep signed copies with each job file. For field work, add the customer’s own hot-work rules to your permit, since a plant or a construction site may have a permit system of its own that your crew must follow alongside yours.
Guarding shears, brakes, and other machines
The general machine guarding standard, 29 CFR 1910.212, calls for guarding that protects operators from point-of-operation and nip-point hazards, among others, and it lists shears among the machines that usually need point-of-operation guarding. Press brakes, ironworkers, saws, and rolls all belong in the same review. Write a guarding checklist for every machine as it is installed, not after the floor is full.
Guarding and lockout records also feed your workers compensation program, which covers the welders, fitters, and operators who work around this equipment. Keep those records current from the first day, and include them when you apply for coverage.
Welder qualification and structural code work
Welder qualification belongs in a fabricator’s quality file from the start. The American Welding Society’s Certified Welder Program certifies welders who pass a performance-based welding test at an AWS Accredited Test Facility. For structural work, AWS D1.1, the Structural Welding Code for steel, establishes requirements for welding structural steel, including procedure qualification, welder qualification, fabrication, inspection, and acceptance criteria.
Ask each new customer which codes and qualifications its drawings and contracts call for, and keep the answer on file with the job. Weld procedures, welder qualification records, and inspection reports are also the records that defend a completed-operations claim if an installed weld is questioned years later.
Real-World Scenario: A new two-welder shop lands its first stair-and-railing job for a general contractor. The contract asks for proof of welder qualification, additional insured status for the contractor on completed operations, and a certificate before mobilization. Because the shop wrote its procedures, kept its welders’ test records, and bound its liability program before bidding, it meets every item the week the contract arrives instead of scrambling to catch up.
Stainless, chromium, and fume control
If the shop will weld stainless steel or other chromium-bearing alloys, plan fume control before the first job. OSHA’s hexavalent chromium page identifies hot work such as welding on stainless steel and other alloy steels containing chromium metal as a major source of worker exposure. Local exhaust, respiratory protection, and exposure monitoring belong in the plan for that work, alongside the ventilation provisions of the welding rules.
Fume control is part of the workers compensation conversation, and it also affects which jobs a shop can take on. Decide early whether stainless and alloy work is part of your business, because the equipment and procedures it needs are easier to build in at the start.
Insuring a new fabrication shop
A new fabricator’s program is built around hot work and installed work. For a fire at a customer’s site or a failure in something you installed, the claim runs to general liability and its products-completed operations coverage; our explanation of products-completed operations covers how that part of the policy works. Workers compensation covers the crew, property and equipment coverage protect the building, stock, and machines, and an umbrella adds limits when a contract calls for more.
General contractors and owners write insurance requirements into subcontracts, including additional insured status and waivers of subrogation, and our guide to additional insured endorsements explains how those are met. Our page on metal fabrication shop insurance shows how we build fabrication programs. When you are ready, send us your details: the machines on your floor, the kinds of jobs you will bid, and whether any of it gets installed.