Become a Subcontractor
A subcontractor is their own boss. As such, how the project is completed and the method or methods used to accomplish the work he is contracted to perform is his choice. Here are some steps to help you become a subcontractor.
Contents
Steps
- Obtain all necessary licenses. Depending on local government requirements, you may find you only need a business license, but some jurisdictions will require you to obtain professional licenses specific to the type of work you do. Subcontractors working on construction projects, for example, may be require to have a Contractor's License in certain jurisdictions.
- Learn all the rules and laws for the type of work you will do. Much information is available from small business advocacy groups, local regulatory offices, and even the public library. Because laws and regulations vary greatly depending on the type of work you will be subcontracting, specific details are not in the scope of this article.
- Obtain liability insurance: In most cases, subcontractors pay for their own liability insurance as opposed to an employer who provides this for their employees. Subcontractors may also be required to have risk indemnification, workman's compensation insurance, and other coverages specific to their work.
- Know all the laws and know your rights as subcontractor or employee to protect yourself from those who might try to take advantage of you. In construction, a subcontractor may be able, for example, to exercise a builder's lien against a general contractor on a project to insure he is paid in full for work performed.
- Make sure your subcontract agreement covers the entire scope of work of your project, scheduling requirements, insurance requirements, performance bonding, materials furnished by you/by others, and details of how and when you will be paid for completed work.
- Be prepared to work in different places. Subcontractors are more likely to work off-site. Employees generally work on-site under direct control of the employer. To be a successful subcontractor you may find you have to travel to pursue your desired work.
- Set your hours as required. Subcontractors may set their own hours and how and when the work will be performed, depending on the project schedule and contractual requirements.
- Have adequate cash flow. Subcontractors pay all of their expenses and bill for reimbursement for the job. By contrast, employers may pay an employee’s expenses, such as travel costs, lodging, and meals when working away from home.
- Subcontractors may provide all of their own equipment, whereas an employer usually pays for all supplies and equipment required for the job.
- Find your clients. A subcontractor gets their own customers, while an employer generally provides the customers.
- Expect to have to keep improving yourself. Subcontractors seek out and pay for their own training.
- Understand the finances. Subcontractors receive the full contracted pay for the job whereas employers pay salaries or wages for the job.
- Subcontractors are responsible to pay all of their taxes. This is in contrast to employers, who have to withhold taxes from an employee.
Tips
- Think long term, including setting goals, and maintaining good relationships with your suppliers, vendors and sources, as well as the business you are performing work for.
- Include overhead in price estimates for jobs. Every item used during a project has cost associated with it.
- Keep detailed records of all work performed, especially if changes are required in the course of your project that may affect scheduling, costs, or scope of work.
Warnings
- Subcontract agreements must contain a complete scope of work, itemized list of materials you must supply, as well as specifications for them, and a detailed schedule of when phases of work must be completed.
