General information, not legal, tax or insurance advice. Subcontract terms, insurance requirements and payment laws vary by state and by contract. Have a construction attorney review any contract you will sign repeatedly, and ask your insurance agent about any insurance clause before agreeing to it.
How you are treated for tax
When a GC pays you as a subcontractor you are a business, not an employee. The GC will usually collect a Form W-9 from you and report what it paid you on Form 1099-NEC. The IRS says the reporting threshold is $2,000 for payments made in 2026, up from $600 for earlier years; this was changed by legislation, so check the current instructions. You report that income on Schedule C, and the GC withholds nothing, so see our tax guide. Keep your own record of every payment; a 1099 can arrive late or be wrong.
Classification is about the relationship, not the label on the paperwork. The IRS groups the evidence into behavioral control (does the payer control how you do the work), financial control (who supplies tools, who can profit or lose, whether you have unreimbursed expenses) and the relationship between the parties (contracts, benefits, permanence). A W-9 does not settle the question. If a GC sets your hours, supplies everything and treats you like staff, ask whether you should be classified as an employee. Your state may have its own, stricter test, and the IRS offers Form SS-8 for a determination.
What GCs ask you to carry
Expect a package request before you can start. Typical items:
- Licence and, where your state requires it, a registration or a business licence
- General liability with stated limits
- Workers' compensation, or proof that you are legally exempt
- Auto liability if you drive to jobs
- A signed W-9
COIs and additional-insured requests
A certificate of insurance (COI) is a summary document your agent issues. A GC often also requires to be named an additional insured. That coverage is created by an endorsement on your policy; the line on a certificate does not create it. Practical points from insurance-industry guidance:
- Ask your agent for the endorsement itself, and the form number, when the contract requires additional-insured status.
- Check whether the contract wants coverage for ongoing operations, completed operations, or both. Different forms cover different periods.
- Read the contract's insurance clause before signing. If it asks for more than your policy can provide, tell the GC early; do not accept it and hope.
- Some contracts also ask you to indemnify the GC for claims. That is a legal obligation separate from insurance, and some states limit how far it can go. This is the clause to show an attorney.
A blanket endorsement can cover parties required by written contract, while a scheduled one names the GC. Ask your agent which you have and what each costs.
Pay-when-paid and pay-if-paid
Two clauses look alike and are not:
- Pay-when-paid sets timing: you are paid within a stated period after the GC is paid. Many courts read it as giving the GC a reasonable time to pay, not the right to never pay.
- Pay-if-paid makes the owner's payment to the GC a condition of your payment. If the owner never pays the GC, the GC may argue it owes you nothing.
Whether a pay-if-paid clause is enforceable varies widely. Some states restrict or void it, some require very explicit condition language, some decide case by case, and many enforce it. Law-firm summaries even disagree on some states, so do not rely on a blog to tell you where you stand. What you can do:
- Find the clause before you sign and ask for a fixed payment date, or a "reasonable time" backstop if the owner does not pay.
- Find out who the owner is, and whether the project is financed or bonded.
- Preserve your lien rights. Send your preliminary notice on time if your state requires one, and calendar the deadlines (see our getting paid guide). Courts in some states treat lien rights as a protection a pay-if-paid clause cannot waive, and in others waiver language is enforced, so read any waiver carefully.
- Bill small and often.
Terms to negotiate
- Retainage (the share held back until completion): ask for a percentage and a release date.
- Payment cycle: net 30 from invoice rather than from "approval".
- Change orders: written, priced and approved before you work.
- Back-charges and backup crews: get the process in writing.
- Scope and schedule: a solo sub cannot be on two sites at once, so say how you will handle overlapping starts.
Sources
- IRS: Am I required to file a Form 1099 or other information return?
- IRS: Instructions for Forms 1099-MISC and 1099-NEC
- IRS: Independent contractor (self-employed) or employee?
- IRS: Worker classification 101
- Builders Mutual: Additional insured endorsement
- IRMI: Avoiding common insurance certificate errors in contracting services
- Bradley: Nevada Supreme Court holds that pay-if-paid provisions require case-by-case analysis
- PilieroMazza: Enforceability of pay-if-paid clauses in construction subcontracts