Subcontractor

Subs sign a subcontract with the GC that usually passes down the relevant terms of the main contract: scope, schedule, insurance, payment terms and how changes are handled. Read it closely for pay-when-paid or pay-if-paid language, retainage, indemnity and back-charge clauses.

Because a sub has no contract with the owner, its payment depends on the GC. Lien laws and payment bonds exist largely to protect subs and suppliers, but many states require preliminary notices to keep those rights, so know your state’s rules.

A GC hiring subs should collect a W-9 and a certificate of insurance before work starts, and check licenses where the trade requires one. Payments to unincorporated subs may need to be reported on Form 1099-NEC.

Whether a worker is a true subcontractor or an employee depends on how much control the GC has over the work, not on what the paperwork says. Misclassifying employees as subs can bring back taxes and penalties; the IRS and state labor agencies publish their tests.