When a construction job is large or complex, it is common for more than one company to be involved. The builder hired by the owner may in turn reach agreements with other companies to perform certain portions of the construction. These secondary businesses are known as subcontractors, because they contract with the primary company, known as the general contractor.
Illinois law lays out several requirements before a sole proprietor or partnership can legitimately do work as a subcontractor. The list is fairly long and can be found here. Among the requirements are:
- The would-be subcontractor is not subject to cancellation or destruction once the relationship with the contractor ends.
- The sole proprietor or partnership makes its services available to the general public or the business community on a continuing basis.
- The sole proprietor or partnership owns the capital goods of the business, and gains the profits and bears the losses.
- The sole proprietor or partnership has the right to perform similar services for other parties whenever it wants on whatever basis.
- The sole proprietor or partnership provides the services rendered for the contractor under the sole proprietor or partnership’s name.
These requirements are meant, in part, to establish that the subcontractor is in fact a separate business from the contractor.
As with any contractual relationship between businesses, a contractor-subcontractor relationship can sour, especially if each party’s obligations are poorly defined or not made clear to one of the parties. A clear and comprehensive contract, perhaps written with the assistance of an attorney, can prevent many headaches later.
