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January 18, 2023

How to Become a Subcontractor in Ontario

Canada’s construction industry is projected to grow steadily over a forecasted period between 2022-2026, and this growth is expected to last for a long time. This means there will be more job opportunities for skilled trade workers in the coming years, including subcontractors.

Since most construction projects are made up of smaller, separate projects, general contractors usually outsource subcontractors and employ them to do various work around the project site. 

This typically includes:

  • Painting;
  • Plumbing;
  • Tearing down existing structures;
  • Pouring concrete; and
  • Carpentry. 

Since subcontractors work under the general contractor, it’s critically important that the general contractor have adequate insurance coverage. If you’re interested in knowing how to become a subcontractor, read more below!

What Is a Subcontractor? 

Subcontractors are hired by the general contractor to work on different parts of a construction site. However, the overall responsibility to see a project to completion will still be the general contractor’s obligation. 

The two also have important distinctions between them. Contractors provide their services to the client for a set fee and duration under a contract for their services. Salary is also paid by the hour, or on a lump-sum basis.

Subcontractors, on the other hand, take on work that a contractor cannot do but is still responsible for. While the contractor works on overseeing the project or maintains the relationship with clients, the subcontractor provides a specialized skill set in exchange for a contractual fee. 

Knowing these distinctions can help you decide which path you want to follow. If you feel like the latter is the career for you, here are some tips to help you become a subcontractor:

1. Gain Relevant Work Experience

As mentioned, subcontractors offer specialized skills on construction sites and come with certain liabilities. General contractors need faith in a subcontractor’s ability to handle the tasks given to them. Having a resume that demonstrates extensive experience in your field signals to employers that you’re the right one for the job.

To gain more experience, subcontractors may:

  • Complete an apprenticeship;
  • Attend a skilled trades school; and
  • Work for a larger subcontracting firm before working alone.

Because the construction industry is booming, gaining relevant skills is fairly easy. What’s even better is that while building your resume, you’re already earning a salary for your services.

A flatlay of subcontractor tools

2. Set Up A Business Structure and Register Your Business Name 

Even if you are self-employed, your employers will still see you as a business entity. Therefore, choosing the right structure and suitable business name for your services is essential as a subcontractor. 

In determining the right business model, consider the following questions:

  • What is the type of industry that I’ll be working in? Some companies only employ businesses operating under a specific structure.
  • How much is the cost? Choose the business structure that you can afford.
  • Will my business grow in the future if I choose this? The rules and regulations for subcontractors may vary depending on the area. That’s why when choosing a structure, you should consider if there is a possibility for you to do business in other provinces. 

Using a business name (that’s not your real name) helps create that barrier between you and the services you provide. It’s also more appealing and professional under certain circumstances.  

3. Obtain The Right Trade Qualifications

One of the most important tips on how to become a subcontractor in Ontario is obtaining the right trade certifications. Depending on the location or your area of specialization, you may need a license to become a working subcontractor. Failure to meet the legal requirements may lead to fines or orders from relevant authorities to stop working.

Contractors will only hire subcontractors who operate legally. Consult with government agencies or authorities to find out how to get a work permit or license in your area. Remember, to do thorough research on how to obtain a license before starting business operations, as these permits vary.

4. Obtain a Business Number and Settle Tax Requirements

As with any business entity, subcontractors also need to follow tax reporting regulations set by the Canada Revenue Agency (CRA). The type of business structure you follow will determine the type of taxes you pay.

Sole proprietorship is the usual business structure for subcontractors. However, if you employ other workers as part of your service, consider choosing a corporate business structure instead. To err on the side of caution, consult a licensed accountant to ensure you won’t run into legal troubles in the future.

5. Choose the Right Insurance Plan

Since subcontractors are considered freelancers, you’ll be on your own in more ways than one. Construction sites are hazardous places to work in, so accidents can happen at any time. Causing property damage, third-party physical injuries, or even losing your tools or damaging equipment can spell trouble for you. The legal fees alone could bankrupt you, not to mention the claims you’ll have to address as well.

Insurance policies will protect you against potential liabilities in the future. Once you’ve taken care of your business license and settled on the financial structure, it’s time to secure the appropriate insurance coverage for you. 

Even though subcontractors work under general contractors, their insurance policies will typically be inapplicable to you. Additionally, some clients expect their subcontractors to have their own insurance policies before hiring them for the job. This isn’t always the case, but it always pays to be prepared.

Two people exchanging papers

Examples of Insurance Policies for Subcontractors

Some examples of insurance policies that subcontractors may need are:

  • General Liability insurance: This covers a lot of third-party lawsuits resulting from unforeseen circumstances, including third-party physical injury and property damage.
  • Builder’s risk insurance: This is a must-have for every contractor involved in building structures from scratch or renovating existing ones. It covers theft and damage to buildings under construction, its materials, and the tools and equipment used in the project site.
  • Tools and equipment insurance: A subcontractor’s tools are susceptible to theft, vandalism, or damage. This type of insurance covers costs if their tools or equipment gets lost, stolen, or destroyed. In some cases, this policy can even reimburse or replace equipment damaged by natural disasters.

Are You Ready to Become a Subcontractor?

As an award-winning commercial insurance brokerage firm, Contractors Insurance is known for providing exemplary customer service. Our dedicated team of experts is always ready to answer your questions and assist you with anything you need to know about your subcontractor insurance package. 

Whether you’re still setting up your license, or choosing your business structure, we’re here for you all the way.

For more information about our personalized insurance packages in Ontario, contact us today or get started with a quote!


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