What a general contractor should track that a solo contractor should not

This article lists what the law makes a GC track and what a solo trade can skip. Each number names its source in the same sentence.

How many subs a GC juggles

A home takes two dozen subs, so the tracking load is real.

The NAHB survey of 354 builders put the median at 22 subs per home and the average at 24. In that same NAHB survey, 69 percent of builders used between 11 and 30 subs on one house. And 77 percent of those builders subcontracted at least 75 percent of the cost. For every construction task NAHB asked about, at least two thirds of builders said they always subcontract it.

A solo trade is one of those 24. They track one contract, one client and one invoice. The GC tracks all 24 plus the owner. That is the gap this article is about.

Tax forms for every sub

Pay a sub $2,000 in a year and the IRS wants a form.

The IRS instructions for Form 1099-NEC say you must file one for each person you pay at least $2,000 in nonemployee compensation in a year. The same IRS instructions say the form is due to the IRS and to the sub by January 31, on paper or online. The IRS instructions also say the $2,000 line may move with inflation in later years, so check it each season.

With 24 subs per home from the NAHB count, that is up to 24 forms per house, all due on the same day. A solo trade who hires no one files zero. The moment a solo pays a helper $2,000, the IRS instructions put them in the same boat.

Paying subs on time

On federal jobs the clock is 7 days.

Under 31 U.S.C. 3905, the Prompt Payment Act, a prime on a federal construction job must pay each sub for good work within 7 days of getting paid by the government. The same section, 31 U.S.C. 3905, says a prime that pays late owes the sub an interest penalty at the rate set in section 3902(a). So a GC must track two dates for every sub. The day the government check landed, and the day the sub got paid.

A solo sub does not track this for anyone below them. I come back to their side of it below.

Holding money back

Held money has a cap and a clock, and both differ by state.

In New York, General Business Law section 756-c caps money held back on private jobs at 5 percent of the contract sum, for the owner and for any contractor holding money from a sub. That same New York section 756-c says the owner must release the held money no later than 30 days after final approval of the work. Late release under New York section 756-c earns interest at 1 percent per month from the day it was due.

On federal jobs, 31 U.S.C. 3905 lets a prime hold back a set percentage of each progress payment without cause, but only if the subcontract says so. The GC must track that percentage per contract. Other states differ, and some set no cap on private work, so read yours.

Insurance from every sub

In Florida, an uninsured sub's workers become your problem.

Florida Statutes section 440.10 makes a contractor liable for workers' compensation for the employees of any sub that has not secured its own coverage. The same Florida section 440.10 requires the contractor to get evidence of workers' comp from each sub. That is the legal root of the certificate of insurance file. One certificate per sub, and it must be current on the day the sub is on site.

A solo trade holds one certificate, their own. The GC collects one from each of the 24 subs the NAHB survey counted, and watches each expiration date. Other states set GC liability for uninsured subs in different ways, and some do not require the GC to collect evidence at all.

Lien waivers by state

Some states say which form the waiver must be on.

Levelset, a Procore company that sells lien waiver software, says 12 states require a statutory lien waiver form or something close to it. Levelset names Arizona, California, Florida, Georgia, Massachusetts, Michigan, Mississippi, Missouri, Nevada, Texas, Utah and Wyoming. I did not open those statutes myself. Treat the list as Levelset's claim and read your own state's code before you rely on it.

The GC list in one table

Six things the law lands on the GC and not the solo.

What a solo should track

The same rules cut the other way.

Every rule above protects the sub too. Under 31 U.S.C. 3905, a sub on a federal job is owed payment within 7 days of the prime being paid, plus interest if it is late. Under New York section 756-c, the money held from a sub is capped at 5 percent, due within 30 days of final approval, and it earns 1 percent per month if held longer. A solo who does not track those dates is leaving money with the GC.

So a solo tracks one line per job. What was held, when it was due, and what it has earned since. The GC tracks the paying side for 24 subs. Same law, opposite chair.

What we got wrong

I set out to say these are GC only duties, and they are not.

The IRS instructions put any solo who pays one helper $2,000 in a year on the same 1099-NEC hook as a GC. The 24 sub figure comes from one NAHB survey of 354 new home builders, so it says nothing about remodelers or commercial GCs. The held-money and payment numbers I verified are New York and federal, and I could not verify a state by state table, so I did not print one.

What stays human is judgment. Deciding if a certificate is real and current is a phone call to the agent. Deciding when to release held money on disputed work is a call the owner makes. Negotiating a change order with a sub is a conversation, not a field in a database.

Where the software fits

A ledger that remembers the dates so you do not.

The VuseDesk General Contractor plan is $99.99 a month, and the Contractor plan for a solo trade is $39.99 a month. A sub sees only the jobs you put them on, never the client's scope and never your prices unless you turn that on per sub, per job. VuseDesk records payments and never processes or moves money, so the check still comes from you.

If you run subs, try the General Contractor plan at vusedesk.com and put the 1099 dates, the held-money clock and every certificate expiration in one place. If you are one of the 24, the Contractor plan tracks your side for $39.99 a month.