General Contractor vs Subcontractor: Contracts, Permits, Liens and Licenses

A general contractor (GC) signs the prime contract with the property owner, answers for the whole job, pulls the building permit and hires and schedules the trades. A subcontractor signs with the GC, not the owner, and performs one defined part of the work, such as the wiring, the plumbing or the roof, and answers to the GC for that scope.

That line decides who pays whom, who can file a lien, who insures what, and which license each company holds. For the licensing rules in every state, see how to get a contractor license in each state.

At a glance Contract: the GC holds the prime contract with the owner; the sub holds a subcontract with the GC. Permits: the GC usually pulls the building permit; licensed trade subs often pull trade permits. Money: the owner pays the GC, the GC pays the subs, and an unpaid sub can still have lien rights. Licensing: in California, Arizona and Nevada the law defines "contractor" to include subcontractors. Trade work: Florida requires a contractor to subcontract electrical, plumbing and mechanical work unless it holds that trade license.

The Two Roles Side by Side

The quickest way to see the difference is side by side. Each row is covered in detail below.

For a full breakdown of the GC role itself, see what a general contractor does; this page stays on how the two roles compare.

The Prime Contract and the Chain of Command

Every job has one contract at the top. The owner signs it with the GC, and that prime contract sets the price, the schedule, the scope and the warranty for the whole building.

The GC then signs a subcontract with each trade. The electrician, plumber, HVAC company, roofer and drywall crew each agree with the GC, not with the owner. That is why a sub takes direction from the GC's superintendent, bills the GC and settles disputes with the GC.

Nevada writes this structure into its contractor law. NRS 624.215(8) says each construction project must have one, but not more than one, prime contractor who is a licensed contractor and is responsible for the work, with limited listed exceptions.

A sub can also hire its own subs, called sub-subcontractors, one step further down the chain.

Who Hires Whom

The owner hires one GC. The GC hires the subs, and each sub hires and pays its own workers.

That hiring line decides responsibility. If a sub's work fails inspection, the GC answers to the owner and the sub answers to the GC. If a sub's employee is hurt, the sub's own coverage is the first line of protection, which is why GCs collect insurance certificates before a sub steps on site.

Who Pulls the Permits

On a typical project the GC pulls the building permit and coordinates the inspections. Many building departments also require the licensed trade contractor to pull the electrical, plumbing or mechanical permit for its own work, so a sub often carries its own permit under the GC's building permit.

Pulling a permit is treated as acting as a contractor. Nevada's NRS 624.020 says securing a permit is prima facie evidence that the person is acting in the capacity of a contractor, Arizona's A.R.S. 32-1151 treats securing a permit or employing a person on a construction project as prima facie evidence that a contract exists.

For the permit rules in more detail, see can you pull a permit without a contractor license.

How Each Gets Paid

The owner pays the GC, usually in progress payments tied to milestones such as foundation, framing, rough in and final. The GC's price covers the trades it hires, its own crews, supervision, overhead and profit.

The sub bills the GC, not the owner, for its scope of work. Subcontracts are commonly priced three ways:

• Fixed bid: one price for the whole scope.
• Time and materials: an hourly rate plus the cost of materials.
• Unit pricing: a price per unit, such as per fixture or per square foot.

Payment timing comes from the subcontract, and terms such as net 30 days after invoice are common. A sub should read any pay when paid clause before it signs.

Lien Rights and the Notice a Sub Must Send

A sub has no contract with the owner, yet in most states it can still claim a mechanic's lien against the property when it is not paid. That is why owners ask GCs for lien waivers from every sub before releasing a payment.

The catch is the notice. Many states require a sub to send an early notice to the owner before it can later record a lien, and the deadline varies by state:

• California: Civil Code 8204 says a preliminary notice must be given not later than 20 days after the claimant first furnishes work. A late notice still counts, but only for work performed within 20 days before it was served and after.
• Florida: Florida Statutes 713.06(2)(a) requires a lienor who is not in privity with the owner to serve a notice to owner before starting, or not later than 45 days after starting, to furnish labor, services or materials, and before the owner's final payment. A sub-subcontractor must also serve a copy on the contractor.

Miss the notice and the sub can lose the lien even when the money is owed. The deadline follows the state where the property sits.

Insurance, 1099s and Employees

A GC usually requires each sub to carry its own general liability and workers' compensation coverage and to name the GC on a certificate of insurance. The sub's policy protects its own crew and its own work; the GC's policy covers the project and the GC's crews.

The tax line is separate from the license line. The IRS says the business must decide whether each worker is an employee or an independent contractor by weighing all the evidence of control and independence, grouped into three categories: behavioral control, financial control, and the type of relationship.

• A subcontracting company that runs its own business, bids its own jobs and supplies its own crew is generally not the GC's employee. Payments to it for services are reported as nonemployee compensation on Form 1099-NEC where the IRS rules require it.
• A worker the GC directs on how, when and where to work, with the GC's tools and on the GC's schedule, can be an employee no matter what the paperwork calls him or her. The GC then withholds income tax and Social Security and Medicare taxes and pays the employer share and unemployment tax, as the IRS page explains.

When the answer is unclear, either the business or the worker can file IRS Form SS-8, and the IRS will review the facts and make an official determination. Calling a crew "subs" does not change what they are.

How Licensing Splits Between a GC and a Sub

A subcontractor is not exempt from licensing because it works for a licensed GC.

Three state laws say so in their definitions. California B&P 7026 says "contractor" includes subcontractor and specialty contractor. Arizona's A.R.S. 32-1101 says a contractor includes subcontractors and specialty contractors, and Nevada's NRS 624.020 says a contractor includes a subcontractor or specialty contractor.

The GC license covers managing the project and the building trades its class allows. The trade license covers the regulated trade itself. In California, trade contractors hold specialty classes from the same board as general contractors, such as the C-10 Electrical, C-36 Plumbing and C-20 Warm-Air Heating, Ventilating and Air-Conditioning classes. In North Carolina, electrical contractors are licensed by the State Board of Examiners of Electrical Contractors and plumbing and heating contractors by a separate board, apart from the general contractor board.

Several states go further and require a GC to hand regulated trade work to a licensed sub unless the GC holds that trade license itself. The table below shows six of them.

For the trade side in more depth, see the guides for an electrical contractor license, a plumbing contractor license, an HVAC contractor license and a general contractor license. Every state's sub rules are collected in subcontractor license requirements by state.

Does a Subcontractor Need Its Own License? Six States

Table notes

• California: B&P 7026 puts subcontractors inside the definition of contractor. B&P 7057(b) bars a general building contractor from taking a prime contract for a project involving trades other than framing or carpentry unless it requires at least two unrelated trades besides those, or the GC holds the classification or subcontracts with a licensed contractor. Fire protection and well drilling always need the class or a licensed sub.
• Florida: Section 489.113(3) says a contractor shall subcontract all electrical, mechanical, plumbing, roofing, sheet metal, swimming pool and air conditioning work unless it holds that trade's certificate or registration, with listed exceptions such as shingle roofing on a new building of the general, building or residential contractor's own construction. Under 489.113(2), an unlicensed sub may work under a licensed contractor's supervision only inside that license's scope, with the supervising contractor responsible, and never in the trade categories of 489.105(3)(d) to (o).
• North Carolina: G.S. 87-43 bars anyone from electrical contracting without a license from the electrical board, and G.S. 87-21 requires a license before engaging in plumbing, heating or fire sprinkler contracting. The general contractor license under G.S. 87-1 applies where the cost of the undertaking is $40,000 or more.
• Arizona: A.R.S. 32-1101 includes subcontractors and specialty contractors in "contractor," and A.R.S. 32-1151 makes it unlawful to act as a contractor without a license in good standing in the company's own name.
• Nevada: NRS 624.215(3) says a general building contractor shall not perform specialty contracting in plumbing, electrical, refrigeration and air conditioning or fire protection without a license for the specialty, and may take specialty work without that license only as prime contractor on a project.
• Virginia: Va. Code 54.1-1103 bars contracting work without a license, and the definition in 54.1-1100 covers work performed "in whole or in part." The same section requires a master tradesman license as a condition of licensure for electrical, plumbing and HVAC contractors.

Setting Up a Subcontract the Right Way

The same checks protect the GC hiring a trade and the trade taking the job. Work through them in this order.

1. Look up the license. Check the sub's license number, class and status on the state board's lookup, and make sure the class covers the work in the subcontract.
2. Collect insurance and tax forms. Get a certificate of insurance naming the GC and a Form W-9 before the sub starts, so the year end 1099-NEC is ready.
3. Write the scope down. The subcontract should name the scope, the price method, the schedule, the payment terms and any pay when paid clause.
4. Settle the permits. Agree in writing who pulls the building permit and who pulls each trade permit, and that each permit holder carries the right license.
5. Send or track the lien notice. A sub sends its preliminary notice or notice to owner on time; a GC keeps a list of every notice it receives.
6. Trade lien waivers for payments. The GC collects a lien waiver from each sub with each payment, and the owner collects them from the GC.
7. Close out cleanly. Final inspection, final waivers, warranty terms in writing and the 1099-NEC filed where the IRS rules call for one.

Can a Subcontractor Work Without a GC?

Yes. A property owner can hire a trade directly for a single trade job, such as an electrician for a panel upgrade, a plumber to repipe a house, or a roofer for a replacement. In that case the trade company is the prime contractor on that job and signs directly with the owner.

An owner can also act as an owner builder under the rules of some states and hire the trades directly; North Carolina's G.S. 87-1(b)(2), for example, exempts an owner building for the owner's own occupancy who complies with G.S. 87-14. The owner then takes on the GC's jobs: scheduling, permits, inspections and paying each trade.

For any job with several trades and a building permit, a GC is strongly recommended, because coordinating the trades is full time work.

Who Carries the Risk

The GC carries most of the risk on the project:

• Financial: on a fixed price contract, the GC absorbs an overrun.
• Schedule: a late trade is the GC's problem to solve with the owner.
• Coordination: trade conflicts and rework land on the GC.
• Warranty: the GC answers to the owner for the finished work, including the subs' work.
• Legal: the GC is usually the first party named in a defect claim.

A sub carries the risk inside its own scope. If its work fails inspection or causes damage, it answers to the GC for the fix.

Staying a Sub or Becoming a GC

Staying a sub suits a company that loves its trade's technical work and does not want to run other companies' schedules and budgets.

Becoming a GC suits a company that manages people, schedules and money well and is ready for the added risk. For the full path, see how to become a general contractor.

The Qualifier Behind Every License

Both a GC and a licensed sub rest on the same thing: a qualifying individual who meets the state's experience and exam rules on the company's behalf. The name changes by state, but the idea does not.

Arizona calls this person the qualifying party and, under A.R.S. 32-1101, requires that person to hold an ownership interest in the license or be regularly employed by the licensee. Virginia's 54.1-1100 defines a designated employee as a full time employee or member of responsible management who passed the board's exam for the contractor. North Carolina's G.S. 87-43 requires at least one listed qualified individual to be regularly on active duty at each place of business, with the duty and authority to supervise the electrical work.

A trade company that wants to add a GC class, or a GC that wants to add an electrical, plumbing or HVAC class, needs a qualifier who holds that class's credentials. If nobody on the team has them yet, a qualifying agent can qualify the company as a full time W-2 employee who actually supervises the work. See what a qualifying agent is, or hire a qualifying agent to add a class without waiting years to earn it in house.

Frequently Asked Questions

What is the difference between a GC and a subcontractor? A GC holds the prime contract with the owner and manages the whole job, including the building permit and the trades. A subcontractor holds a contract with the GC and performs one part of the work. The GC answers to the owner; the sub answers to the GC.

Is a subcontractor a contractor? Yes, under state licensing law in many states. California B&P 7026, Arizona A.R.S. 32-1101 and Nevada NRS 624.020 each say "contractor" includes subcontractors, so a sub needs its own license for the work it performs.

Can a general contractor do electrical or plumbing work itself? Not without the trade license where the state requires one; otherwise it hires a licensed sub. Florida's 489.113(3) requires a contractor to subcontract electrical, plumbing and mechanical work unless it holds that trade's certificate or registration, and Nevada's NRS 624.215(3) says a general building contractor shall not perform plumbing or electrical specialty work without the specialty license. California's B&P 7057(b) bars a general building contractor from taking a prime contract for a single trade other than framing or carpentry unless it holds that class or subcontracts with a licensed contractor.

Who is liable for a subcontractor's mistakes? The GC answers to the owner for the whole project, including the subs' work. The sub then answers to the GC under the subcontract.

Is a subcontractor a 1099 worker or an employee? It depends on the facts, not the label. The IRS weighs behavioral control, financial control and the type of relationship. An independent subcontracting business is generally paid as nonemployee compensation, while a worker the GC directs like staff can be an employee.

Can a subcontractor file a lien if the owner already paid the GC? In many states, yes, if the sub gave the required notice on time. California requires a preliminary notice within 20 days of first furnishing work, and Florida requires a notice to owner within 45 days of starting.

What is the difference between a subcontractor and a trade contractor? Mostly the contract, not the work. A trade contractor hired directly by the owner is the prime contractor on that job; the same company hired by a GC is a subcontractor. It needs the same trade license either way.

Talk to The Licensing Company

Our founders, Marshall Schofield and Jeremiah Jaskulski, work with GCs adding trade classes and trade companies moving up to a general license, across the country. If you need to know which license your company needs for the work you want to take, or you need a qualifier to get there, call us at 615-219-2110 or start at hire a qualifying agent.

Sources

All retrieved 2026-09-30.

• California Business and Professions Code 7026, contractor defined
• California Business and Professions Code 7057, general building contractor
• California Civil Code 8204, preliminary notice deadline
• Contractors State License Board, license classifications
• Florida Statutes 489.105, definitions
• Florida Statutes 489.113, qualifications for practice and subcontracting
• Florida Statutes 713.06, notice to owner
• North Carolina G.S. 87-1, general contractor defined
• North Carolina G.S. 87-21, plumbing, heating and fire sprinkler contractors
• North Carolina G.S. 87-43, electrical contracting
• Arizona Revised Statutes 32-1101, definitions
• Arizona Revised Statutes 32-1151, contracting without a license
• Nevada Revised Statutes chapter 624, contractors (NRS 624.020 and 624.215)
• Code of Virginia 54.1-1100, definitions
• Code of Virginia 54.1-1103, necessity for license
• IRS, independent contractor or employee
• IRS, about Form 1099-NEC