I only get ICAs from the contractors I’m paying…if they bring in sub-contractors, I won’t get ICAs from the subs. That said, I *will* require proof that the subs are insured (either independently or through the GC) and I will do my best to ensure that the subs get paid by the GC.

I generally don’t ask for lien waivers, as I’m not too concerned about contractors filing false liens (and there are other defenses against this anyway). But, if you’re going to require lien waivers, the key is to get *every* contractor to sign one. And don’t pay the GC until he gets his subs to sign the lien waivers…that will protect you in case the GC doesn’t pay the subs with your money…

On the lien waiver, do you get everyone to sign this? Same situation as above where I only pay my contractor. I think that anyone doing work on a job can file a mechanical lien, like if I pay my contractor but he doesn’t pay the sub.

I wrote up a draft of what I was looking for in an agreement, and gave it to my attorney. By the time it came back to me, I barely recognized the document, but it included everything that I wanted plus all the stuff he thought was important to have as well.

This is generally how I deal with legal docs — I write a draft and then give to my attorney to “fix”…

Jason

J. Scott briefly touched on one of the key determining factors the courts look at to determine if someone is an employee: The control of the details of the work.

You can specify you want a particular task accomplished and the types of materials, but try not to get much more detailed than that or you risk being viewed as an employer. Why does that matter? For on thing, your responsible for the torts and actions of your employee.

Great question! There are several schools of thought on whether you should purchase materials for your contractor or whether you should let your contractor purchase the materials. Ignoring the question of whether it will make you look like an employer for just a minute, my personal opinion is that you should be buying all your finishing materials yourself (not letting your contractor do it). Not only can you likely get better prices if you’re doing a decent number of houses, but this way you can avoid contractor markup and you can ensure that the finishes in your houses are appropriate for your rehab. Like you mentioned, we always use the same finishing materials in every house, which provides some additional benefits; letting the contractors choose our materials would negate those benefits.

Now, as for whether there is a risk of looking like an “employer” by buying your own materials, it’s certainly an issue. The IRS uses many criteria to determine is someone you’re paying is an employee or an independent contractor, and there isn’t any single one of those criterion that will make or break an argument that the IRS might take. Instead, they will look at the whole picture, and based on ALL the data, they’ll make a determination.

So, while the IRS normally would look at someone who buys materials to more likely be considered in the “employer” category, as long as the bigger picture makes the relationship look like an independent contractor relationship, you should be okay. This means having an ICA, not providing tools, not withholding taxes, not dictating how work gets done, not dictating hours, ensuring that your contractor takes other jobs, not paying for your contractor’s insurance, etc. If you ensure that you adhere to all those other rules, the fact that you are providing materials shouldn’t be a major issue to the IRS if they ever need to make this determination.

All that said, I’m not a tax attorney or CPA, so if you have any additional concerns, definitely talk to a tax professional…