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A subcontractor is a worker who is not your employee. You give a Form 1099 to a subcontractor showing the amounts you paid him. The subcontractor is responsible for keeping his or her own records and paying his or her own income and self-employment taxes.
?[I]f an unlicensed person performs work and is paid for it, the customer then has a choice: if he is happy with the work done, he may allow the unlicensed contractor to keep the funds; if he is unhappy with the work done, he may pursue his legal remedies by suing for damages.?
In short, someone who sets their wage, hours, and chooses the jobs they take on is a subcontractor, while someone whose employer specifies their wage, hours, and work tasks is an employee.
Yes. It may be illegal for the subcontractor to operate without a license, but that does not mean a project owner can simply keep the value of the work performed without paying for it.
Most Construction contractors (both primes and subs) must be licensed with the Arizona Registrar of Contractors; some exemptions apply. To become a licensed contractor, you must submit an application showing you have passed one or more written exams, met appropriate experience requirements, and have sufficient bonding.
Arizona Revised Statutes, Title 32, Chapter 10 requires a contractor be licensed through the Registrar of Contractors (ROC) to legally perform construction or home repair and remodeling jobs having total project cost, including labor and materials, above $1,000 or requiring a building permit.
Contracting without a license in violation of A.R.S. § 32-1151 is a class 1 misdemeanor (A.R.S. § 32-1164). All class 1 misdemeanors carry a maximum term of six months in the county jail and a maximum fine of $2,500 plus an 83% surcharge.