This is the least glamorous guide on the site and one of the most important. The legal and insurance foundations are what stand between you and the single bad job that could otherwise wipe you out. Get them right once, early, and they protect every job you ever run. This is general guidance, not legal advice - confirm specifics for your jurisdiction with a professional.
Insurance: non-negotiable from day one
Because your company holds the client contract, the client's recourse is against you. Insurance is what stops a single accident or claim from being existential.
- General liability insurance (called public liability in the UK, Australia and similar markets) - covers injury to people or damage to property arising from the work. The baseline every operator must carry. Many clients and commercial sites won't engage you without it.
- Professional indemnity / professional liability - if you advise, design or specify, this covers claims that your advice caused loss. Add it if you do anything beyond pure co-ordination.
- Workers' compensation / employer's liability - required the moment you employ staff in most countries (workers' comp in the US, employer's liability in the UK). Know the line and don't cross it accidentally with "self-employed" people who are really employees.
- Your subcontractors' own cover - this is the one beginners miss. Every trade must carry their own liability insurance. Ask for the certificate before they start. Your policy does not automatically cover an independent subcontractor's mistakes, and you don't want to discover that after a flood.
The client contract: your single best protection
Every job - small, large, friend or stranger - gets a written contract. It's not bureaucracy; it's the document that resolves disputes before they happen and keeps your margin intact. At minimum it states:
- Scope of works - exactly what's included, in plain language.
- What's explicitly excluded - your best defence against scope creep eating your profit.
- Price - the inclusive figure, and that variations are charged separately.
- Payment terms - deposit and staged payments, with what triggers each (cash flow).
- Timeline - start and expected duration, with sensible caveats.
- Variations clause - how changes to scope get priced and approved, in writing.
- Guarantees & defects - what you stand behind and for how long.
For larger or commercial projects, standard industry contract forms exist for good reason (JCT in the UK, AIA in the US, and national equivalents elsewhere) - use the appropriate one for your country rather than a homemade document once the values get serious.
Subcontractor agreements: protect the other side of the deal
You hold a contract with the client; you should hold one with each trade too. A simple written subcontractor agreement should cover:
- The scope and standard of their work and the agreed price/day rate.
- Payment terms, including the retention you hold until snagging is signed off.
- Confirmation they carry their own insurance and required certifications.
- That they're responsible for putting right defects in their work.
- Their status as an independent subcontractor, not your employee.
This isn't about distrust - it's about clarity. When everyone knows the deal in writing, jobs run smoother and the rare dispute has a clear answer.
Regulated work: the line you cannot cross
Some work is legally restricted to certified people, and getting this wrong is where "arbitrage" turns into genuine danger and liability. You are not doing the work - but you are responsible for ensuring the right person does:
- Gas and electrical work must be done by someone holding the right licence or registration for your country (Gas Safe in the UK, a state or provincial licence in the US and Canada, and national equivalents elsewhere). Verify the licence number.
- Notifiable or permitted work must be done or certified by a qualified, registered person under your local scheme.
- Building permits, building-regulations and planning approvals must be in place where required - extensions, structural changes, certain conversions. The names differ by country; the obligation doesn't.
- Asbestos, structural and specialist work has its own legal regime. Never let an unqualified trade near it to save money.
The rule is simple: never let the wrong person do regulated work, ever, for any price. Always verify certifications, always ensure the proper notifications and certificates are issued, and always hand those certificates to your client. Cutting a corner here doesn't just risk your business - it risks someone's safety, and that's the line that turns a respectable operator into the "scam" the skeptics warn about.
Tax and the money side
Keep clean records from job one - every quote, invoice, payment and trade cost. You'll need them for tax, and construction often has its own wrinkles: many countries tax or report payments between contractors and subcontractors specially (the Construction Industry Scheme (CIS) in the UK, 1099 reporting in the US, and similar regimes elsewhere). Get an accountant who knows construction in your country early; it's cheaper than the mistakes you'll otherwise make.
Boring done once protects you forever. The operators who skip insurance and contracts are fine - right up until the one job that ends them.
Next, learn the mistakes that sink operators who did set up properly: 9 Mistakes That Kill Construction Arbitrage Businesses.
Frequently asked questions
What insurance do I need?+
At minimum, general liability insurance (public liability in the UK) for your business. If you give design or advice, add professional indemnity. If you employ staff, workers' compensation or employer's liability is required in most countries. Critically, you must also ensure every subcontractor carries their own liability cover - your policy is not a substitute for theirs.
Do I need a written contract for every job?+
Yes, always, even for small jobs and even with people you like. A written contract defining scope, price, payment stages, timeline and what's excluded protects both sides and resolves nearly every dispute before it starts. Verbal agreements are where money and reputations get lost.
Am I liable if a subcontractor does bad work?+
To the client, generally yes - your company holds the contract, so you carry responsibility for delivery. That's exactly why you vet trades, require their insurance, use written subcontractor agreements, and hold retention against their work. You manage the liability down the chain, but to the client you are the one accountable.
Mohamed El HadriCo-Founder
I'm a co-founder of several construction companies. I built a construction business from a 30-van operation into a lean model with 1,400+ subcontractors in the database - winning the work as the main contractor, subbing it out, and running it as a system from a laptop across multiple countries. I write this site from what actually works.
@mointhemarket · 30k followers on Instagram →Run the model with people who already do
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