Subbing another Electrical Contractor?

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titan1021

Senior Member
I am a licensed EC in CA. A good friend of mine just became a licensed EC recently. We have been kicking around the idea of using each other as subs, in order to take on larger projects or just to help each other out as needed. We are both one man shows at the moment.

Just looking for any general advice or suggestions from other EC's that have done this.

Thanks
 

GerryB

Senior Member
I am a licensed EC in CA. A good friend of mine just became a licensed EC recently. We have been kicking around the idea of using each other as subs, in order to take on larger projects or just to help each other out as needed. We are both one man shows at the moment.

Just looking for any general advice or suggestions from other EC's that have done this.

Thanks
That would probably work if you just gave each other a day or so for certain jobs, like a service change, but I would think your price would be high if you figured a job with both of you as contractors.
 

goldstar

Senior Member
Location
New Jersey
Occupation
Electrical Contractor
I do this often and it works out fine. As GerryB mentioned it works fine for small jobs. For example, if you each separately contracted for a service change you can just swap the time and no $$ changes hands. Another thing you should do is come up with an agreed upon fixed labor price for each of you for your time on a daily basis. That way, if you don't have another job to swap the time with your friend then you can write him a check for that day rate and call it "casual labor". Once you pay out over $600 to your friend (or vice-versa) then you'll have to send out Fed 1099's to each other at the end of the year. If this happens in each of your cases the you will also be required to provide certificates of insurance for each other and have workers comp insurance.

You can both take on larger jobs but I would suggest that you separately take on those jobs as the prime electrical contractor while hiring the other. Once you get into partnerships then you're in a different ball game. You should have a lawyer draw up an agreement and signed by both of you. Your lawyer will explain the details but it should include items like :
  • What the responsibilities of each partner are
  • How the profits are split
  • Salaries for each partner
  • Who will be president
  • Who will be CFO
  • Time off for each partner
Etc.

Some of it will seem trivial but you need to have all these things spelled out before you enter into the agreement. In the original simple form where you're both just swapping time, if it doesn't work out then you both go your separate ways. If a partnership goes south it starts to get ugly, especially with a good friend. Speaking from experience, I had a best friend (actually the best man at my wedding) that I haven't spoken to since 1993 (my choice). I worked for him for 10 years and found that he was a control freak to the point that if you went out to dinner with him he'd order for you. At work, no matter what you did it was either the wrong thing or it wasn't good enough. Make sure that you like your friend enough to enter into a partnership, if that's what you choose to do.

Good luck.:cool:
 

petersonra

Senior Member
Location
Northern illinois
Occupation
engineer
in general, these kind of relationships seem to flounder eventually as one side or the other decides he is putting more into it than he is getting out of it.

best bet IMO is to try and insulate yourselves from each other's foibles as much as possible by having written agreements in place as another poster suggested, and realize that in the end, the arrangement will probably not work all that well for one of you.

people think this kind of arrangement allows them to help each other out when one or the other is slow. the problem is that as often as not, both are busy or slow at the same time, so either no help is needed or there is no help available because it is spoken for already.

some people can make this kind of thing work, but the few cases I have run across of this kind of thing have generally not worked out all that well.
 

gadfly56

Senior Member
Location
New Jersey
Occupation
Professional Engineer, Fire & Life Safety
I do this often and it works out fine. As GerryB mentioned it works fine for small jobs. For example, if you each separately contracted for a service change you can just swap the time and no $$ changes hands. Another thing you should do is come up with an agreed upon fixed labor price for each of you for your time on a daily basis. That way, if you don't have another job to swap the time with your friend then you can write him a check for that day rate and call it "casual labor". Once you pay out over $600 to your friend (or vice-versa) then you'll have to send out Fed 1099's to each other at the end of the year. If this happens in each of your cases the you will also be required to provide certificates of insurance for each other and have workers comp insurance.

You can both take on larger jobs but I would suggest that you separately take on those jobs as the prime electrical contractor while hiring the other. Once you get into partnerships then you're in a different ball game. You should have a lawyer draw up an agreement and signed by both of you. Your lawyer will explain the details but it should include items like :
  • What the responsibilities of each partner are
  • How the profits are split
  • Salaries for each partner
  • Who will be president
  • Who will be CFO
  • Time off for each partner
Etc.

Some of it will seem trivial but you need to have all these things spelled out before you enter into the agreement. In the original simple form where you're both just swapping time, if it doesn't work out then you both go your separate ways. If a partnership goes south it starts to get ugly, especially with a good friend. Speaking from experience, I had a best friend (actually the best man at my wedding) that I haven't spoken to since 1993 (my choice). I worked for him for 10 years and found that he was a control freak to the point that if you went out to dinner with him he'd order for you. At work, no matter what you did it was either the wrong thing or it wasn't good enough. Make sure that you like your friend enough to enter into a partnership, if that's what you choose to do.

Good luck.:cool:

The advice I've seen is "Make friends with your partner, don't make a partner from a friend".
 

just the cowboy

Inactive, Email Never Verified
Location
newburgh,ny
Watch out

Watch out

If you do this watch out, the tax people see this as tring to get away from hiring someone. If x percent of your work comes from the other person and they give you daily directions they might see it that way. Best to ONLY do this WHEN the extra help it is needed.
 

goldstar

Senior Member
Location
New Jersey
Occupation
Electrical Contractor
If you do this watch out, the tax people see this as trying to get away from hiring someone.
That is correct. That's why I mentioned anything under $600.00 is considered "casual labor". Once you go over that you are actually hiring him as a sub-contractor and he has to provide all his own insurance, etc. and pay his own taxes.
 
As suggested above, I have a couple of EC's that are also good friends. We just pay each other a set hourly price on labor. 1099's are no big deal. I also get listed (and vice a versa) on their liability insurance policy. I have workers comp, but because they're contractors, and have their own policies, I don't have to cover them.

Works out great for us, as the original contractor can still make a profit on the job.

We also share employees as needed. Each contractor that borrows a worker pays them as employees for the time they work, including taxes, WC, etc. We keep it all above board (no cash work)

That being said, trust is a big part of this equation.
 

Dennis Alwon

Moderator
Staff member
Location
Chapel Hill, NC
Occupation
Retired Electrical Contractor
I, too, have done this in the past. Generally I would rather just give him the job to do rather than try and hire him as a sub. It works out great that way. I have also hired him to work as a sub when I have already started a large job and I am in a bind. Sometimes I hire them just because they are slow and he needs the work.

In my case this particular guy worked for me for 4 years many years ago. We help each other out often-- he has also thrown work my way when he was too busy.

Knowing the person you are working with is, of course, important. The problem that can occur is when you have that person helping you and then his calls start to come in.. Now he has to take care of his business and it can leave you in a bind. I would not take work on based on them helping me out.
 
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