Can I Subcontract Work Through My LLC as a Contractor?

Yes, you can subcontract work through your LLC as a contractor, as long as your client agreement permits it and you follow proper legal and tax procedures when hiring and paying subcontractors.

If you’ve landed more work than you can handle or want to scale your service-based business, subcontracting is a common and often necessary step. Your LLC becomes the primary contractor, while subcontractors help you deliver the agreed services. Done correctly, subcontracting can help you grow revenue, maintain deadlines, and manage larger projects without hiring employees. But it also comes with responsibilities.

1. Understand Your Role as the Primary Contractor

When your LLC signs a contract with a client, you are responsible for delivering the final work-regardless of who helps you complete it. If you choose to bring in subcontractors, you are still accountable for the outcome, deadlines, and client satisfaction.

Subcontracting doesn’t remove liability or client expectations. It simply allows you to delegate portions of the work to other professionals who operate as independent contractors, not employees.

2. Check Your Client Agreement for Subcontracting Clauses

Before hiring any subcontractors, read your contract with the client. Some agreements include clauses that:

• Require written consent before using subcontractors
• Prohibit outsourcing any part of the project
• Hold you liable for the actions and performance of subcontractors

If your contract is silent on the matter, it’s still good practice to inform the client and get approval-especially if the subcontractor will interact directly with them. Transparency helps build trust and avoid misunderstandings.

3. Choose the Right Subcontractors

When selecting subcontractors, look for professionals who:

• Have experience in your industry or niche
• Operate their own business or LLC (to avoid employment classification issues)
• Can meet your quality standards and deadlines
• Understand the scope of work and your expectations

It’s your reputation on the line, so take the time to vet subcontractors, review samples, and clarify timelines before bringing them into a project.

4. Use a Subcontractor Agreement

Always use a written subcontractor agreement between your LLC and any freelancer or contractor you hire. This document should outline:

• The scope of work
• Payment terms and schedule
• Project deadlines
• Confidentiality requirements
• Ownership of intellectual property
• Non-compete or non-solicitation terms (if needed)

This protects your LLC, clearly defines responsibilities, and prevents disputes down the line.

5. Pay Subcontractors Properly and Track Payments

Subcontractors are independent businesses-not employees. That means:

• You do not withhold payroll taxes
• You pay them based on their invoice and agreed terms
• If you pay $600 or more to any subcontractor during the year, you must file IRS Form 1099-NEC (unless they operate as an S or C corporation)

Use bookkeeping software to track all subcontractor payments and gather W-9 forms at the start of the relationship. This keeps your LLC compliant and makes tax season easier.

6. Avoid Worker Misclassification Issues

If your subcontractor works exclusively for you, under your direction, and on a fixed schedule, the IRS or state labor board may consider them an employee-even if you call them a contractor.

To avoid misclassification risk:

• Don’t control how or when the work is done
• Hire contractors with other clients and their own business entity
• Pay by project or milestone rather than hourly schedules
• Allow them to use their own tools and methods

Your LLC should maintain contractor relationships that are clearly independent and legally distinct from employment.

7. Plan for Project Oversight and Quality Control

Subcontracting doesn’t mean stepping away from the work entirely. As the primary contractor, your LLC is still responsible for:

• Communicating with the client
• Setting deadlines and deliverables
• Reviewing all subcontractor work
• Making sure everything meets contract standards

Build in time for quality checks and feedback before handing over the final product to the client.

Subcontracting through your LLC is not only legal, it’s often a necessary step for growth. As long as your client agrees, and you follow the right legal and tax procedures, you can scale your services, take on larger projects, and build a team of reliable contractors under your brand. Just remember: your LLC is the face of the work, so choose your subcontractors wisely, put everything in writing, and manage every project with professionalism.