Construction law governs the process of subcontracting

On Behalf of Dunlap Fiore, LLC |

Construction projects in Baton Rouge are often overseen by a general contractor. However, because the nature of these projects are so complex, general contractors often form agreements with subcontractors who will perform specific tasks. The subcontractor reports to the general contractor while the general contractor will still be ultimately responsible for seeing that the project is completed on time and in the manner agreed upon.

Subcontracting can be useful if a project involves tasks that are not within the primary abilities of the general contractor. Subcontracting can save money and mitigate any risks associated with the construction project. In addition, when basic but necessary tasks are undertaken by subcontractors, the general contractor has the time and resources to focus on other lucrative projects. And, subcontracting is often cheaper than hiring employees, as employers must not only pay an employee’s wages, but also insurance benefits and Social Security taxes.

Subcontractors generally must be licensed by the state and be in good standing with taxes and other state and federal regulations. Per the Internal Revenue Service (IRS), subcontractors generally must also pay self-employment taxes. However, they may be able to take advantage of certain business-related tax deductions.

Subcontractors have legal duties, both with regards to the contracts they form with general contractors and as an independent business. Subcontracting can be a complex area of construction law. It is important for both general contractors and subcontractors to understand what is required of them under the law. If they do not meet federal or state regulations, or if there is a breach of contract, it could not only slow down the project, but it could also lead to sanctions or litigation. Thus, general contractors and subcontractors often consult with legal professionals, to avoid these undesirable consequences.