What Documents Do I Need From a Subcontractor?

Engaging an independent subcontractor requires careful management of documentation. Collecting the right paperwork helps maintain clear financial records, ensures tax compliance, defines the scope of work, and establishes legal safeguards for your business.

Required Tax and Identification Form

The first document to collect from any U.S.-based subcontractor is a completed IRS Form W-9, “Request for Taxpayer Identification Number and Certification.” This form gathers the subcontractor’s name, business name, and Taxpayer Identification Number (TIN). You must keep this record on file for at least four years, but it is not filed with the IRS.

The TIN will be either a Social Security Number (SSN) for an individual or an Employer Identification Number (EIN) for a business entity. The Form W-9 also requires the subcontractor to certify their business structure, such as a sole proprietorship, corporation, or partnership. This detail affects year-end tax reporting.

You will use the W-9 information to issue a Form 1099-NEC, “Nonemployee Compensation,” to the subcontractor and the IRS if you pay them $600 or more in a calendar year. The deadline to send this form to both parties is January 31 of the following year. A blank Form W-9 can be downloaded from the IRS website.

Verifying Insurance Coverage

A subcontractor’s insurance provides financial protection for your business. Before work begins, obtain a Certificate of Insurance (COI) from them as proof of coverage. The COI is a summary from their insurance broker outlining active policy details.

The COI should list two primary types of insurance: General Liability and Workers’ Compensation. General Liability protects against claims of property damage or bodily injury caused by their work. Workers’ Compensation provides benefits to their employees if injured on the job, preventing them from suing your company.

When reviewing the COI, verify the policyholder’s name matches the subcontractor and check that the policy numbers and effective dates are current. Also, ensure the coverage limits meet your project’s requirements.

It is standard practice to request that your business be named as an “additional insured” on the subcontractor’s general liability policy. This status extends their liability coverage to your business if a claim arises from their work and should be noted on the COI.

The Subcontractor Agreement

The subcontractor agreement is the legally binding contract that defines the working relationship. This written document sets clear expectations, mitigates potential disputes, and should be signed by both parties before any work begins.

A comprehensive agreement should clearly outline several components to protect both parties:

• A detailed Scope of Work (SOW) that precisely describes the services, materials, and expected deliverables.
• The payment terms, including total compensation, a schedule of payments, and accepted methods.
• Project timelines that specify the start date, key deadlines, and the final completion date.
• An Independent Contractor clause to affirm the subcontractor is not an employee, clarifying responsibilities for taxes and benefits.

Professional and Business Licensing

Depending on the trade and jurisdiction, a subcontractor may need specific licenses to perform their work legally, which demonstrate they have met minimum standards of competency. It is your responsibility to verify they hold all necessary and current licenses before the project begins.

Required licenses can vary significantly. Trades like electrical, plumbing, and HVAC often require a professional license from a state or local board, while many local governments also require a general business license to operate. You should request copies of these licenses and check their expiration dates.

Invoicing and Payment Records

Maintaining a clear paper trail for all financial transactions is important for project accounting and tax purposes. Each payment made to a subcontractor must be supported by a detailed invoice they provide, which serves as a formal request for payment.

A complete invoice should include the following information:

• A unique invoice number and the date of issuance.
• The subcontractor’s full name and contact information.
• A detailed breakdown of the services rendered or products supplied.
• The total amount due and the payment terms.

Upon final payment, you should request that the subcontractor sign a lien waiver. This document is a receipt confirming they have been paid in full for their work. By signing it, the subcontractor gives up their right to place a mechanic’s lien—a legal claim for unpaid work—on the property, ensuring a clean project closeout.