Is Construction Arbitrage Legal in Mississippi?

Yes. Construction arbitrage is legal in Mississippi. The model - holding the prime contract, subcontracting the physical work, keeping the spread - is entirely legal and is how Mississippi general contractors have always worked. The compliance question is whether you hold the right licence for the work you are taking on.

Mississippi uses a two-board system. Commercial, industrial, and public work at $50,000 or above is governed by the Mississippi State Board of Contractors (MSBOC). Residential building and remodelling sits under the Mississippi Residential Builders Commission (MRBC). Know which board covers your work, get the right registration, and the model runs clean.

Is construction arbitrage legal in Mississippi - the direct answer#

Construction arbitrage means you win the prime contract, your subs do the physical work, and you keep the margin between what the client pays you and what the subs cost. Some people call it contractor arbitrage or construction dropservicing - same model, different names.

Nothing about that structure is illegal. The global legality answer covers this across every country. Subcontracting work out is standard practice at every scale of the industry. The legal requirement is that the prime contractor - you - holds the correct licence for the state and the job value.

In Mississippi, that licence comes from the MSBOC for commercial work or the MRBC for residential work. Below the threshold values, you comply through local building permits. Above the threshold, you need a state licence before you sign anything.

Commercial work: the MSBOC licence and the $50,000 threshold#

The Mississippi State Board of Contractors licenses contractors for commercial, industrial, and public construction work. The trigger is $50,000 per project.

Any commercial job at or above $50,000 - offices, retail units, industrial fit-outs, public buildings - requires an MSBOC licence before you take it on. That threshold applies per project, not per year. If a single job reaches $50,000, you need the licence.

One thing the MSBOC looks at closely: artificially splitting a project into smaller contracts to stay below the threshold is treated as unlicensed contracting. If the work is one continuous project, the board looks at the full value, not the invoice breakdown.

Specialty contractors face a lower threshold. Electrical, plumbing, or HVAC work valued at $10,000 or more requires a specialty contractor licence from the MSBOC, regardless of whether the overall project is commercial or residential. A $15,000 HVAC replacement on a commercial unit requires a licence. So does a $12,000 electrical fit-out.

To get an MSBOC commercial or specialty licence, expect to:

• Pass a trade-specific exam and a Business and Law Management exam, both through PSI (70% pass mark)
• Show four years of experience in the relevant field through your qualifying party
• Submit three reference letters, one from a bank
• Carry general liability insurance
• Carry workers' compensation if you have five or more employees
• Pay the application fee (around $400 for a commercial licence)

The MSBOC also requires a qualifying party - an individual whose experience and exam results underpin the business licence. That person's credentials are what the licence is built on.

Residential work: the MRBC and the $10,000 threshold#

Residential construction in Mississippi sits under a separate body: the Mississippi Residential Builders Commission (MRBC). The MSBOC licence does not cover residential work.

Two categories matter for construction arbitrage:

• Residential Remodeler licence: Required for renovation, repair, or improvement of an existing residential property valued at $10,000 or more. This is the one that catches most people. A $12,000 kitchen refit, a $15,000 bathroom renovation - both require an MRBC Remodeler licence.
• Residential Builder licence: Required for new residential construction valued at $50,000 or more.

MRBC applications require similar documentation to MSBOC - a notarised application, three reference letters (one from bank), experience evidence - with exams through PSI. Annual renewal and two hours of continuing education per year keep the licence active. Annual fees are around $50.

Below the thresholds, there is no state licence requirement for residential work, but local permits still apply. Check with the local building department in every jurisdiction you work in.

Specialty trades: every sub needs their own licence#

This is the part that catches construction arbitrage operators who are new to Mississippi.

Your MSBOC licence covers you as the prime contractor. It does not cover the subs working under you. Every electrical, plumbing, or HVAC subcontractor doing specialty work valued at $10,000 or more must hold their own independent MSBOC specialty contractor licence.

Mississippi licenses the business entity, not the individual tradesperson at the state level - so your plumbing sub needs to be a properly licenced plumbing contractor business to take on work above that threshold. Their licence is separate from yours. You cannot extend your coverage to them.

Before you put a trade sub on a job:

1. Verify their MSBOC licence status at msboc.us
2. Check the licence classification matches the work they are doing
3. Confirm it is current and not lapsed

If a sub is unlicensed and something goes wrong - a defect, an injury, an enforcement action - that problem lands on the job, and on you as the prime. Checking licences before the job starts is the one step that protects you from that.

The same logic applies if a sub is doing commercial work over $50,000 as a sub-tier contractor. They need their own MSBOC commercial licence. Your licence does not pass down the chain.

Workers' compensation in Mississippi construction#

Mississippi's workers' compensation threshold is five employees. Below five, a business is not required to carry WC under state law. That is a higher bar than most states.

For construction arbitrage operators, that sounds simple. In practice, there is a catch.

Under § 71-3-7 of the Mississippi Code, if a subcontractor's worker is injured on your job site and that sub does not carry workers' compensation, the injured worker can be treated as your statutory employee. That means they can claim WC benefits against you, as the principal contractor.

The rule applies when a general contract is in place and the relationship is more than just a premises owner - which it is, on any active construction job.

The practical answer: verify that every sub carries their own workers' compensation coverage before they start work. Get a certificate of insurance. Not because the law requires you to carry WC at low headcounts, but because the statutory employer rule means their uninsured workers are your problem the moment something happens on site.

Mississippi WC is a private market. Contractors buy coverage through private insurers; there is no state fund monopoly here.

Penalties for unlicensed contracting#

The MSBOC enforces. Doing commercial work above $50,000 without a licence in Mississippi is a criminal misdemeanor under § 31-3-21 of the Mississippi Code: fines up to $1,000 and up to six months in jail. On top of the criminal track, the Board can impose civil penalties of up to $5,000 per violation, and up to 3% of the total contract value. It also has the power to issue stop-work orders and require disciplinary hearings.

The practical hit that bites most: unlicensed contracts are unenforceable. If you do commercial work over $50,000 without an MSBOC licence and the client does not pay, you cannot sue to collect. The court will not hear the claim.

For residential work, the MRBC enforces under § 73-59-9: fines of $100 to $5,000 or 30 to 60 days in county jail, and again the unenforceable contract rule applies.

The compliance picture for construction arbitrage in Mississippi#

The short version:

• Commercial jobs at $50,000+: hold an MSBOC licence before signing
• Specialty trade work (electrical/plumbing/HVAC) at $10,000+: hold or ensure your sub holds a specialty contractor licence
• Residential remodelling at $10,000+: hold an MRBC Remodeler licence
• New residential builds at $50,000+: hold an MRBC Builder licence
• Every trade sub doing licensed work must independently hold their own licence
• Verify every sub's WC coverage even if your own headcount is below the five-employee threshold
• Below the thresholds: no state licence required, but local building permit requirements apply

The do you need a contractor licence for construction arbitrage post covers this framework across the US. The insurance guide covers what GL and WC coverage to carry alongside the licence.

Mississippi is a state where the model is entirely viable. The licensing is straightforward compared to some states - one main board for commercial, one for residential, clear thresholds, and a workable exam route. Get the licence, vet your subs, and the operation runs.

Last checked: 11 October 2026.