Legal, Tax, and Insurance Requirements for Hiring Construction Professionals in America

Legal, Tax, and Insurance Requirements for Hiring Construction Professionals in America

If you own the building that houses your business, there may come a time when you will need to expand or add on to your existing space. You might also consider hiring someone to do routine repairs and maintenance. When it comes to hiring people for construction work around your business, you need to consider several factors, including who to hire as well as your tax and insurance responsibilities.

Who to Hire

Construction Agency

If you are looking at a large-scale expansion or remodel, you should consider hiring a construction company for the job. The construction company should take care of hiring workers, paying employment taxes for the workers, and insurance coverage โ€“ including contractor insurance โ€“ for the project.

The construction company should also provide all of the tools and supplies for the job, or make sure its contractors have done so.  However, it will charge you for any materials and labor, including administrative work like payroll and project management.

However, even though the construction company is responsible for screening its contractors and getting the proper paperwork, you should make sure all of their paperwork is in order before you have them start on the job.

If you are looking at smaller jobs, like maintenance and repairs, you could be better off hiring someone directly. However, your legal, insurance, and tax responsibilities will vary, depending on whether you hire an independent contractor or an employee.

Independent Contractor

Like the construction company, the independent contractor should be responsible for getting his own contractor insurance, and handling his own taxes. The independent contractor should also provide his own tools and supplies for the job, however he may charge you for any of the materials he uses, in addition to labor.

You will need to file a 1099 with the IRS, and you should have him fill out an I-9 proving his eligibility to work in the United States.

You should also conduct a background check and evaluate his ability to do the job. This should include checking his references from previous business clients.


When you hire someone as an employee, you will have much more responsibility.

You may be required to get liability insurance as well as workerโ€™s compensation insurance. You might also need to pay state unemployment insurance. Check with the Department of Labor to determine the rules for your state.

As the employer, you will be responsible for providing the tools and supplies he needs, as well as all materials in addition to his salary.

You may need to perform a background check, including getting references from previous employers.

You will be required to pay a percentage of his salary to Social Security and Medicare supplement plans 2021, as well as withhold the employeeโ€™s share from his paycheck. You will also need to pay federal unemployment taxes and file an IRS form W2 at the end of the year.

You will also need to have him fill out an I-9 and present documentation proving his eligibility to work in the United States.


If you have a large business, and a high amount of maintenance, you could be better off hiring an employee, or group of employees, versus an independent contractor. That way you always have someone on hand if you have an emergency repair.

Smaller business with, smaller maintenance needs, could be better off with an independent contractor.

However, for a large-scale project, or if you would rather not deal with all of the legal and tax responsibility, you could be better off outsourcing to a construction company.


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