Most of the general contractors often get projects that require a lot of trades works to be completed besides the main works. Since you’re not the only one working on a project, you have to have a general contractors insurance that covers subcontractors too, that is, with whom you share the builder’s risk. Risk sharing must be done correctly to prevent the general contractors get in unexpected problems. In this text, you can find five important advice about this matter.
For general contractors in the fields of scaffolding, roofing, excavation, a good option is to register as an LLC. This contractor’s trade considers to be of higher risk, so in that case, if anything happens, owners and managers will be covered. LLC would be held responsible for arrears or debts instead of them.
![](https://thefrisky.com/wp-content/uploads/2018/10/GC-1.jpg)
image source: sisn.com
If you pay a subcontractor through 1099 form, and they don’t have a certificate or can’t provide insurance, you can ask them to make an agreement. On your subcontractor agreement, you can bill a certain amount as a rate from the subcontractors for worker’s compensation. Subcontractor will have to charge more to reimburse that rate. Your rate is about 30% higher than the rate subcontractors can get on the market.
If you don’t have a policy and an accident happens, you will have to pay a coverage up to a couple of millions of dollars, which is a fatal situation for many businesses. Even though the worker’s compensation is expensive, it’s better to have it because it protects both sides that signed the contract. You can make an agreement with your employer or customer to cover this compensation and save yourself the cost.
![](https://thefrisky.com/wp-content/uploads/2018/10/GC-2.jpg)
image source: oakwoodcontracting.com
1099 form isn’t the only form you can use to pay people. There are a few essential advantages you get when you use 941 form instead. For example, it’s easier to retain a good quality team and maintain control. 1099 is an adequate choice when your goal is to overlook the requirement to pay for worker’s insurance or to easily write them off. And it’s just a matter of time when you’ll hire employees who provide less quality work.
The last but not least important thing to know is about the “ghost” policy. If you plan to get this kind of policy, also called “if any” policy, you need to be very strict about getting required certificates from your subcontractors you pay through 1099 form. Having collected subcontractors policies, you’ll be covered in front of audits for the expenses on equipment and parts of your subcontractors. Many businesses ended up with 10 thousand dollars in debt because of this little mistake. Also, you will have to give your insurance company all payroll information from your tax return in the three month period after the duration of the policy. So it’s better to make sure you have all the subcontractor information sooner than later!