How to Become a Subcontractor in Any Profession

More than 30% of the workforce escaped the 9-to-5 lifestyle to join the self-employed world. Many of these workers also adopted the title of “subcontractor,” a professional hired by general contractors or businesses to complete a task.

You may have heard drywallers, plumbers, and electricians referred to as subcontractors in the construction industry.

They are.

However, freelancers can also be subcontractors. Think graphic designers, IT professionals (information technology), or even accountants and personal assistants.

The question is:

How do you become a subcontractor and ditch that “employee” label? Is it as simple as quitting your job, calling yourself a businessman, and looking for your clients?

Our detailed seven-step guide will teach you how to be a subcontractor in any profession.

1. Discover Your Passion & Choose a Career Path

There are more than 12,000 job titles at your disposal, many of them with freelancing opportunities worth exploring.

But before you become your boss, you need to narrow that list down to just a few possible career paths.

Remember: Prime contractors expect you to be an expert in your craft and entrust you with a leg of their project or even day-to-day duties.

So the first and most important step is discovering your life’s passion.

Questions to Ask Yourself First

If you’re genuinely unsure about which subcontracting direction to go in, these questions should get those creative juices flowing:

1. What are your strengths and weaknesses?
2. Did you enjoy any previous jobs you’ve held?
3. Are you good with your hands? Technology? Communication?
4. What’s your annual income goal?
5. Would you prefer a remote or in-person job?
6. Do you work better in a team or alone?
7. Are you creative? Or do you prefer a by-the-book process?
8. What are your top skills?
9. Do you like your current career choice?

While many people say they don’t like their job, it’s nearly a 50/50 split. While half of all U.S. workers are looking to change their careers, the other half are reportedly comfortable in their current industry.

Proceed to step #3 if you want to turn your current career into a subcontracting gig.

Otherwise, keep reading!

Types of Subcontracting Work

Now that you have a better idea of your skill set and interests, you’re ready to choose a single sector. From there, you can decide which specific gigs match your answers to those nine questions.

The vast world of subcontracting includes:

• Construction (drywalling, roofing, electric, plumbing, carpentry, HVAC)
• Arts (writing, editing, graphic design, painting, fashion design)
• STEM (IT, consulting, web design, cable installation, engineering)
• Transportation (truck driving, auto repair, food delivery, moving)

… and plenty more!

For even more ideas, read Indeed’s list of 19 types of industry sectors.

2. Develop the Skills & Earn the Education

Congratulations!

You’re officially one step closer to becoming a successful subcontractor.

However, simply calling yourself an “electrician,” “writer,” or “truck driver” doesn’t exactly make you qualified to accept those gigs.

At least not yet!

For this next step, you’ll need to prove to future clients that you’re:

1. Worth hiring
2. An expert in the industry
3. Skilled enough to be trusted with their project
4. Not a liability to them

That begins with honing your skills and earning the credits.

Do You *Need* a Degree?

The beauty in subcontracting is that you’re not working with a traditional employer. Whether or not you need a degree or certificate is at the discretion of the general contractor and possibly state law (depending on the sector).

For some perspective:

Sixty-five percent of regular job opportunities require at least some college (preferably a degree).

Yet, in the construction industry, where subcontractors band together to complete entire projects, just 12% of these positions asked for a post-secondary diploma.

Floral designers, tax preparers, and security guards don’t require college. Meanwhile, if you’re pursuing graphic design, technical writing, or sales, a bachelor’s degree is preferred.

(But, again, it depends on the contractor and your specialized skills!)

For many types of subcontracting, such as electric or plumbing, a certificate from a trade school is more valuable than a college degree.

If you’re unsure, refer to the U.S. Bureau of Labor Statistics to learn about the educational expectations by job title.

How to Build or Refine Your Skills

Here are three ways to develop the skills needed in your line of work:

Shadow a Professional (Apprenticeship)

Shadowing an industry expert is the best way to learn “how it’s done” in a way that a college course or YouTube video never really can.

Apprenticeships could last anywhere between 12 months and six years, but they also provide hands-on experience that’ll prepare you for future gigs.

Contact your local labor union to ask about local apprenticeship opportunities in your industry. Or, visit Apprenticeship.gov to apply for apprenticeships across the country.

Practice On Your Own

Some professions — like writing, coding, and photography — don’t require in-classroom lectures to excel.

Instead, you can master the craft with hours of practice or self-teaching methods (i.e., reading books, attending conferences, or using services like SkillShare).

Earn Certifications

As the gig economy expands, job competition is becoming fiercer than ever.

Earning relevant certifications — for Java, SEO, or heating professionals — can set you apart from other subcontractors and make a case for higher rates.

3. Secure the Appropriate Licenses & Certificates

Joining the gig economy will give you more control over your career and earnings.

But not without obtaining the proper licenses and certificates first!

Get a Business License

The topic of business licenses is complicated, to say the least.

If you live in a state like Alaska or Washington, all businesses need a license to operate legally. Other states require licenses for only certain professions, while some state governments defer these rules to local municipalities.

Contact your city clerk’s office to learn whether you need a business license to become a subcontractor in your area.

Pursue a Subcontractor License (If Applicable)

Subcontractor licenses are also on a state-by-state and city-by-city basis, although they’re more common for construction subcontractors (i.e., masonry, electric, HVAC, plumbing).

States like Alabama require licensure for work valued at over $50,000. Louisiana, on the other hand, sets its cap at $7,500 for subcontracted construction work not involving hazardous materials.

Working without an appropriate subcontractor license could open you up to penalties, fines, lawsuits, and even fraud charges. It can also ruin your subcontracting business indefinitely.

When other prime contractors learn that you’re unlicensed, they’ll block you from the industry for good.

4. Settle the Tax Question

The terms “subcontractor” and “independent contractor” are easy to confuse, and many people use them interchangeably (albeit incorrectly!).

Let’s talk more about whether this difference matters and how to handle taxes as a subcontractor.

Independent Contractors vs. Subcontractors

The real difference between the two is that independent contractors work directly with a company or employer. In contrast, subcontractors work beneath a general contractor to complete a job they were hired to do.

However, in the eyes of the Internal Revenue Service (or IRS), they share one key similarity: they’re both self-employed, and file 1099s come tax season.

Keeping Track of Your Financial Records

The one downside of being self-employed is that you don’t have an employer tracking your income, and you’ll owe taxes on your earnings each year.

Here are some tips for keeping your finances in order as a subcontractor:

1. Apply for a business credit card to use for business purchases.
2. Don’t commingle personal and business finances.
3. Record your earnings with financial software like Quickbooks.
4. Track your miles driven for business with an app like MileIQ.
5. Save all tax documents and receipts you receive from clients, financial institutions, health insurance companies, etc.
6. Learn about the deductions you’re eligible for as a subcontractor.

The most important thing you can do to prevent an audit or accidental tax underpayment is to keep diligent records.

For many subcontractors, that means hiring a bookkeeper, accountant, or tax preparer to manage their end-of-year finances.

5. Secure the Appropriate Insurance

As a subcontractor, you also meet the IRS’s definition of “small business owner.” And that means anything that goes wrong while on the job will hurt you financially.

Unless, of course, you have the proper insurance.

These are four types of insurances all subcontractors should consider:

General Liability Insurance

A general liability insurance policy will protect you from lawsuits over damages or injuries you cause while on a job site.

For example, if another worker slips on a wet floor you didn’t block off, or if you break a table while carrying it into the moving van, your policy will cover the costs.

E&O Insurance

E&O — or errors & omissions — insurance protects individuals against honest mistakes that cost somebody else.

Sometimes called “professional liability insurance,” these policies will cover the legal fees or settlements when customers take these disputes to court.

Self-Employed Workers Compensation Insurance

Self-employed workers like subcontractors don’t need worker’s compensation insurance.

However, for professions requiring manual labor, it’ll cover your medical expenses and income if you become injured or ill on the job.

General contractors typically have their own worker’s compensation policies. But, unfortunately, they don’t always extend to the subcontractors they hire.

Others leave the choice up to subcontractors: purchase your policy or sign a waiver.

Health Insurance

Unless you’re on your spouse’s or parent’s health insurance plan, you’ll need to purchase coverage in the marketplace.

6. Hire a Legal Team to Handle the Contract Paperwork

The bar for filing lawsuits is so low that more than 40 million are filed each year. Hiring a legal team is the best way to protect your image and income.

What you need is a legally binding contract that lays out all the details of the work you’ve been hired to do. It’ll protect you in the case a general contractor tries to stiff you or asks you to perform more duties than you agreed to.

Here’s a look at what the contract paperwork should include:

Scope of Work

The scope of work defines exactly what the prime contractor hired you to do for this particular job. This section could include the materials you’ll need and a clear time frame for completion.

Insurance

Contracts should also detail what you’re willing to cover with your insurance policies versus what you expect the prime contractor to cover.

Payment

Without a doubt, this is the most crucial part of the entire document.

The payment or billing section should include your rate — either hourly or a flat rate — and when you’ll receive payment (i.e., milestones or at the end).

Claims & Disputes

If you don’t complete the project as expected or the general contractor is unhappy with the work, this section outlines the dispute process.

Termination Clauses

Termination clauses detail the process and rules for terminating the agreed-upon contract before the project is complete.

7. Market Yourself to General Contractors & Business Owners

We’re finally at the end of the guide!

Now that you’ve chosen a profession, mastered the craft, and handled the legal and insurance aspects, it’s time to lock down “clients.” Or, in this case, general contractors.

Here’s how you can do that:

Reach Out to Local Companies & Clients

If you’re starting from scratch, local outreach is the best way to get your name out there. Call, email, or visit companies or contractors that may need somebody with your specialized skills on an upcoming project.

Market Yourself Online

Advertising your services online doesn’t have to mean paid ads.

“Marketing” also includes creating social media profiles for your business and connecting with industry professionals on LinkedIn.

Apply for Subcontractor Positions

Some general contractors and small businesses will list open subcontractor positions on Indeed and Ziprecruiter.

Don’t forget to add certifications, experience, and apprenticeships to your resume before applying.

Encourage Referral Business

If you already have industry connections, ask your previous clients for referrals. The business community is tight-knit, and they might know a fellow business owner looking for your know-how on a larger project.

Attend Networking Events

Networking events are another great way to meet other professionals in your area and open the door to more subcontracting opportunities.

Check your local Chamber of Commerce to learn about upcoming events.

Conclusion

Becoming a subcontractor who excels requires a few extra steps than your traditional 9-to-5 job.

However, most of your fellow subcontractors would agree: it’s worth it!

The flexible hours, set-your-own-rates perks, and ability to choose which contracts you sign are unlike any other type of work.

The tips in this guide will teach how to begin a new career as a subcontractor. Or transition from a traditional job to a subcontractor position.

Join Selfgood to ensure you don’t miss out on healthcare, legal, financial, and other everyday benefits as you start your subcontractor business!