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The Sub-species: Subcontracting in the Sign Industry

To be or not to be a subcontractor?

By Staff

That can be a question for sign professionals seeking to explore options for expansion in the visual communications industry.

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  • What is a subcontractor? What is an independent contractor? Can you be one? Is it worth whatever it takes to be one or the other or both?

    What do these elusive occupations actually entail?

    In any field, subcontracting is an ambiguous undertaking, but there is definitely a market for it in the sign business.

    Despite the mild controversy surrounding the definition of terms in the industry, its relationship with the Internal Revenue Service, and the public's perception of the so-called "sub-species," subcontracting is a good way to avoid large-corporation conflicts, unnecessary overcharging, and, perhaps most importantly-wasted time.

    Subcontracting is often thought of as doing the tasks of a trade "unsupervised." These tasks include supervision, billing, providing benefits, and paying for the time rather than the product. The appeal for professionals in an industry is that independent contractors or subcontractors can vary the clientele they work with and the conditions that they work under. It also varies the different types of sign work they perform. They provide the sign and move on. They feel some sense of freedom and that they are their own boss.

    Typically, the subcontractor is contacted by a store, business, or industry in need of a sign that is a part of a larger job. The subcontractor is allotted a certain amount of time to design, build, and deliver the requested sign item to the customer who has subcontracted the work.

    The subcontractor constructs the sign by his or her own means. They have their own supplies, machinery, workers, and expenses. The customer receives the finished product without really knowing how it was made, who made it, or taking any responsibility for any part of the process. They pay the price agreed upon when the job is offered and taken. If the job takes longer or requires extra materials or special skills, the subcontractor has to "eat" the higher overhead. Subcontract work is a closed deal.

    Often subcontractors are more useful for smaller businesses because large corporations prefer to the perceived cost-effectiveness of acquiring materials and services at bulk rates. They also tend to think of wanting to know where they can find you after the job is over. Larger sign shops seem more secure and reliable than subcontractors.

    Increasingly, over the past decade, the IRS has expressed concern that these self-employed sign makers who work as subcontractors are accumulating more revenue than they actually record. The IRS also is nervous about businesses that are exaggerating the actual costs of subcontractors and then writing them off as business costs.

    Rules have been imposed to ensure that the independent contractor is only paid a fixed amount that is determined prior to the construction of the sign, that the subcontractor has insurance benefits, and that the worker collects payment in the name of the company he or she is working for.

    However, once a written contract is drawn up and signed by both parties, the deal is a clean cut. The subcontractor is legally bound to produce the sign by an assigned date, and for the subcontractor, the hassle that often accompanies running a sign shop is avoided. The independent contractor works at his or her own pace and does not have to deal with the fluctuations in business that can plague a corporation or sole proprietorship.

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    Often, subcontracting is a "side" job for people. Many sign makers use subcontracting as a freelance sort of work-attending to the regular clients primarily, but using independent contracting to sell their skills with sign production to other businesses and companies which do not ordinarily use the sign industry in general or a large shop in particular. For you, subcontracting is a good way of expanding your reputation as a sign-maker, and also for increasing the amount of your individual revenue.

    Subcontracting is also a means for testing the market. New sign makers or those whose experience is primarily working for someone else can see how they like working on their own and dealing with customers. They also can see if the ideas they always wanted to try have a market.

    On the other end, sign shops often hire subcontractors to assist them when overloaded with jobs. Seasonally-the down months for the sign business typically run from December to February-independent contractors are hired as temporary workers if a sudden unexpected surge of work needs to be done.

    They're also used, at times, to do the "dirty work" of the business. Sign makers who don't like heights, for example, or prefer to work with a certain type of sign can hire workers as subcontractors to take on the tasks that the business owner is unwilling to do. Independent contractors can market themselves for specific jobs-specializing in areas such as vinyl, lettering, or graphics.

    Subcontracting allows you to work when you can or when you need the money. Of course, a potential pitfall is that when you really need cash the industry may have hit a slow season. Also, when working as a subcontractor in someone else's shop, you are the first to be out on the street when things turn slow. You may need the work, but they may not need you.

    Furthermore the life of the subcontractor is not all wine-and-roses. Not all of that cash you earn can go just into your pocket. Income taxes, Social Security, and individual states can generate irritating paperwork. They also can cut into profits. Also, if you are hired as a subcontractor by a business, that business will send you and the IRS a W-9, a 1099, or other paper work that may come to haunt you on April 15. Even then you should not really wait until April. You are supposed to pay estimated taxes along the way and keep detailed records of the costs involved with doing business as a subcontractor.

    Plus you should have insurance to cover you and your work as a subcontractor. Businesses-and their insurance companies-who hire subcontractors do not want to be responsible for you. That's why they hire subcontractors. Many, in fact, require proof that you have covered yourself before they give you the work.

    So, as in many things, subcontracting can be appealing and has its pitfalls. You should look into what it takes to be a subcontractor in your area, seek out industry specific publications on independent work in the sign industry, talk to those who have tried it, and weigh its advantages and disadvantages.

    Then you can decide to be or not to be a subcontractor.

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