Subcontractors are the pillars of the construction industry. They provide invaluable specialized expertise, and without them, no job would be quite as secure.
Most professionals look for subcontractors with official licenses for greater assurance that they have the skills and experience necessary to perform the job well. It also gives better liability protection, as a contractor who hires an unlicensed subcontractor may face legal consequences.
If you're interested in providing subcontractor work such as electricity, plumbing, or HVAC, applying for your license is the first step.
While each state has its requirements for subcontractor licenses, the application process has a similar structure. Here we walk you through a basic guide to applying for a subcontractor license.
Why Do You Need a Subcontractor's License?
A subcontractor's license is an essential piece of a professional trade portfolio. It tells prospective clients and general contractors that you have met the state requirements for experience and skills. Also, it shows that you take your work seriously.
Some people may get away with only taking on small jobs with no licensing requirements or under-the-table deals. However, there are multiple reasons why you may need a license.
Legally Practice In Your Field
The first and most important reason to get a subcontractor license is so you can practice your work legally. While some operate as more of a handyman, helping out with small projects here and there unofficially, this method limits you from taking on bigger jobs. It also technically puts you in a gray area of legality.
To avoid any legal consequences, ensure you've met all licensing requirements for your state for subcontractors.
Make More Per Project
With official licensing, you can charge more per project. Some states limit the jobs you can take on based on whether or not you have a license.
For example, California requires a license for any job over $500. Others are more lenient about how much work you can do without a license, but the point is, having one lets you take on more costly projects.
It's also the case that as a bonafide licensed subcontractor, you can charge more per project. Customers know you have greater expertise and can justify paying for more than just the labor and parts.
Stand Out Among Competitors
Holding a valid license in your state can also help you stand out from the crowd. Say a contractor is considering hiring four different options, and only one of them has the proper documentation to prove they are licensed to work in the state. It's a no-brainer that they will select the safer, vetted option.
A license saves general contractors time verifying information and affirms their decision to hire a subcontractor who takes their work seriously.
Protect Yourself from Claims
If for nothing else, getting a valid subcontractor license is vital to protect yourself from claims. Suppose you or someone on your team has an accident, or there is something faulty about the work done. A discovery that you are unlicensed can be highly detrimental. You may find yourself in court, facing hefty fines, and you may not be able to continue working in the field.
How to Apply for a Subcontractor License
Generally, the subcontracting fields that most often require licensing include:
- HVAC Technicians
- Asbestos/Hazardous Waste Professionals
The process of applying for a subcontractor license differs from state to state. Some states may require different licenses, while others require the same as a general contractor. Others may require exams, certifications, and other paperwork before being able to do work. Some states have no state-wide guidelines and leave it up to local municipalities.
Overall, however, the general process of applying involves the same basic steps:
1. Research Your State Subcontractor License Requirements
First, you'll need to spend some time learning more about your state's requirements. Usually, the best place to look is a state's bureau of labor or department of regulatory agencies, though the state licensing agencies may vary.
Each state varies slightly in its requirements. Here are some of the most notable differences in state requirements for subcontractor licenses:
- Alabama—Need a license when working for general contractors or on projects over $50k
- Alaska—Need specialty license with trade endorsements
- Arkansas—Can work under a licensed contractor without a license but must be registered
- California—Must have a Class C license for specialty trades and subcontractors
- Colorado—All requirements set forth at the municipal level
- Florida—Need a Division II certification
- Hawaii—Must have a Class C license
- Illinois—Plumbing and roofing subcontractors need a state license, while others are on a local level.
- Kentucky—Only need a state-level license for electrical, plumbing, and HVAC; others are locally controlled
- Massachusetts—Various requirements based on the scope of work and trade specialty
- Minnesota—Must have a residential building contracting license if performing work on two or more areas, including carpentry, roofing, drywall, masonry, and general installation.
- Nebraska—All contractors earning more than $5,000 each year must register the business with the state program as well as check with local municipalities
- New Mexico—Must have a license based on subcontractor classification
- Tennessee—Need license before contracting with a project over $25,000
- Utah—Apply for specialty trade licenses
- West Virginia—Requires subcontractors to carry a contractor's license for projects over $2,500
- Wyoming—Left to individual municipalities
2. Gather Documents and Fill Out Application
Once you've determined the requirements, it will tell you which applications you need to fill out. These applications tend to be available through the state or municipal licensing authority.
As part of the application process, you'll need to gather all the documents and pertinent information.
3. Take Exam if Necessary
Some states may require an exam before granting licenses, so you need to study and then take the exam to prove your skills and knowledge. At Contractor Training Center, we offer exam help to ensure you pass the exam the first time.
4. Get Approved for License
With your stellar exam performance, you'll receive your approval for the license soon after submitting your application and exam. Once fully licensed, you can begin taking on bigger subcontracting projects.
The Pros and Cons of Subcontracting
Becoming a licensed subcontractor comes with its pros and cons. It's important to weigh both of these before applying and paying the necessary fees so you can make the best decision for yourself and your work.
- Self-employment—Choose which projects to take and which to pass on.
- Flexible Schedule—Work when is most convenient for you, and take off when needed since you work for yourself.
- Higher Market Value—A state license makes you more marketable, and you can charge more for your work.
- Additional Fees—If you start a business, you'll be responsible for paying your taxes, liability insurance, licensing fees, and other startup costs that an employer would otherwise handle.
- Time Intensive—It takes time to apply, study for and take the exam, and get approved for licensing. Some applicants already working full-time labor jobs may find this discouraging, even if it means higher earning potential.
Becoming a subcontractor is an attractive career option for many, and the best way to start is by applying for your subcontractor license. With a license, you'll be able to find more work, charge more per project, and better protect yourself from work accidents. While the application process differs from state to state, following our basic guide above can get you started on your journey to becoming a subcontractor.