General Contractor vs Subcontractor: Key Differences Explained

If you're getting into the construction industry, or hiring someone for a project, understanding the difference between a general contractor and a subcontractor is fundamental. They play very different roles, carry different licenses, get paid differently, and take on different levels of responsibility.

Here's how they compare.

The Basic Distinction

A general contractor (GC) is the primary manager of a construction project. They sign the contract with the property owner, take financial responsibility for the project, and coordinate all the work.

A subcontractor (sub) is a specialist hired by the GC to perform a specific portion of the work, electrical, plumbing, HVAC, roofing, painting, concrete, framing, etc.

Think of it this way: the property owner hires ONE general contractor. That GC then hires MULTIPLE subcontractors, each responsible for their specialty.

Responsibilities Compared

General Contractor

• Signs the prime contract with the property owner
• Creates the overall project plan, budget, and schedule
• Pulls building permits
• Hires, schedules, and manages all subcontractors
• Manages the project budget and cash flow
• Coordinates inspections
• Ensures code compliance across all trades
• Carries the financial risk for the project
• Communicates with the property owner
• Resolves problems across all aspects of the project
• Delivers the finished project

Subcontractor

• Signs a subcontract agreement with the GC (not the property owner)
• Performs work within their specific trade
• Provides their own tools, materials, and labor
• Carries their own trade license and insurance
• Completes work according to the GC's schedule
• Responsible for quality within their scope
• Passes trade-specific inspections

Licensing Differences

General Contractor License

Most states require a general contractor license for anyone managing construction projects above the state's threshold amount. The GC license covers the ability to manage and coordinate a construction project, not necessarily to perform every trade.

GC licenses typically require:

• 3-5 years of supervisory construction experience
• Passing a business and law exam
• General liability insurance and surety bond
• Background check
• Financial qualification

Subcontractor / Trade License

Subcontractors need licenses specific to their trade:

• Electrical license (virtually every state)
• Plumbing license (virtually every state)
• HVAC license (most states)
• Roofing license (many states)
• Specialty contractor license for other trades

Trade licenses typically require:

• Trade-specific experience (often as an apprentice → journeyman → master progression)
• Passing a trade-specific exam
• Trade-specific insurance

In some states (like California), subcontractors need both a general contractor license AND a trade classification. In others, trade licenses are entirely separate from GC licenses.

For details on specific trade licensing, see:

• How to Get an Electrical Contractor License
• How to Get a Plumbing Contractor License
• How to Get an HVAC Contractor License
• How to Get a General Contractor License

How Each Gets Paid

General Contractor Payment Structure

GCs typically earn 10-20% of the total project cost as their fee. This covers:

• Project management and coordination
• Overhead (office, insurance, vehicles, staff)
• Profit margin

GCs receive progress payments from the property owner, usually tied to project milestones (foundation complete, framing complete, rough-in complete, final completion).

Subcontractor Payment Structure

Subs bill the GC (not the property owner) for their specific scope of work. Payment is typically:

• Fixed bid, A flat price for the entire scope of work
• Time and materials (T&M), Hourly rate plus materials cost
• Unit pricing, Price per unit (per square foot, per fixture, etc.)

Payment terms are usually net 30 days after invoice submission, though this varies by contract.

Important: Subcontractors have mechanic's lien rights against the property if the GC doesn't pay them, even though their contract is with the GC, not the property owner. This is why property owners should always verify that the GC is paying their subs.

Who Carries the Risk?

The general contractor carries the lion's share of the risk:

• Financial risk, If the project goes over budget, the GC absorbs the loss (on fixed-price contracts)
• Schedule risk, Delays are the GC's problem to solve
• Coordination risk, If trades conflict or work needs to be redone, it's on the GC
• Warranty risk, The GC is responsible for warranty claims, even for subcontractor work
• Legal risk, The GC is the first party named in any construction defect lawsuit

Subcontractors carry risk within their own scope, if their work fails inspection or causes damage, they're responsible. But the broader project risk sits with the GC.

Can a Subcontractor Work Without a GC?

Yes. In some scenarios, a property owner hires subcontractors directly:

• Simple single-trade projects, Hiring an electrician to upgrade a panel, or a plumber to repipe a house
• Owner-builder projects, The property owner acts as their own GC and hires subs directly
• Specialty projects, A roofing replacement or HVAC installation that only involves one trade

However, for any project involving multiple trades, permits, or significant complexity, using a general contractor is strongly recommended. Managing subcontractor schedules, resolving trade conflicts, and ensuring code compliance across multiple systems is a full-time job.

Which Path Is Right for You?

If you're deciding between becoming a GC or staying as a subcontractor:

Stay a subcontractor if:

• You love the technical work of your trade
• You prefer focusing on one thing and doing it well
• You don't want to manage people and budgets
• You're happy with the income level in your trade

Become a general contractor if:

• You're good at managing people, schedules, and money
• You want higher earning potential
• You enjoy the big picture of how projects come together
• You want to build a scalable construction business
• You're ready for the additional responsibility and risk

Read our guide on how to become a general contractor for the complete career path. If you need help with licensing in any state, The Licensing Company can help.

Schedule a free licensing strategy call