Most contractors vet a sub the same way. They look at the work, they ask around, and if the price is right, the sub starts Monday. The paperwork comes later, if it comes at all.
The work matters, but the work isn't what shows up on your insurance audit, your 1099s, or a lien on your client's house. The paperwork is, and it costs a lot less to collect before the first check than to chase after the last one.
The number: $9,000
Your tile sub quoted $22,000, labor and materials. The work was good, you paid every invoice on time, and the job closed out.
A few weeks later a lien gets filed on your client's house for $9,000. The sub bought the tile on account and never paid the supplier, and in most states an unpaid supplier can lien the property even though you paid the sub in full.
Your client is looking at you to clear it, so you write a second check for materials you already paid for. That's $9,000 out of your profit, on a job you thought was finished.
Nothing about the sub's work would have told you this was coming. A lien release would have.
Every time you pay a sub, you get a signed release for that payment, a partial release with each progress payment and a final release with the last one. When the sub is buying materials on account, you ask for the supplier's release too. It takes a minute per check, and it's the difference between paying for the tile once and paying for it twice.
Six things to have on file before the first check
An active license for the trade. Look it up yourself on your state's licensing site. It takes two minutes, and a photo of a card isn't proof. Work done by an unlicensed sub can hold up your permit and inspections, and in some states it puts your own license on the line.
A workers' comp certificate, or a valid exemption. Without one, in Florida and in most states, their crew counts as yours at your insurance audit, and you pay premium on them as if they were on your payroll. If the owner is exempt, get a copy of the exemption and remember it covers the owner, not the helpers who show up with them. Exemptions expire, so write down the date.
A general liability certificate. Ask for it to come straight from their insurance agent, with your company listed as the certificate holder, and read the dates. Your own liability carrier will ask for these at audit too.
A signed W-9. Legal name, entity type, and tax ID. You need it to file 1099s in January, and if a sub won't give you a tax ID, the IRS expects you to hold back 24% of what you pay them. The 1099 threshold went from $600 to $2,000 for 2026 payments, which means fewer forms to file, not fewer W-9s to collect.
A signed subcontract agreement. Scope, price, payment terms, and how changes get approved, in writing, before work starts. Put the lien release requirement in the agreement too, so nobody is surprised when you ask for one after each payment. This is the $9,000 one.
Two references you call, one of them a supplier. Ask the questions that matter to your books. Did they finish the job, did they bill what they quoted, and do they pay their own people and suppliers on time?
Rules and rates vary by state and by policy, so run your own numbers with your insurance agent.
Want this on one page? Download the free Subcontractor Prequalification Checklist, print one for every sub, and keep it in the file. It has the six items above, plus the three things to check with every payment.
Keep the file current
Collecting the paperwork once is half the job, because certificates expire in the middle of jobs. The simplest system is one rule, one list, and one habit.
The rule: no file, no check. A sub doesn't get set up as a vendor in your accounting system until the file is complete, and whoever cuts checks knows it.
The list: every sub, every expiration date. Review it once a month. When a certificate is 30 days out, ask for the renewal, and if it lapses, payments hold until the new one arrives.
The habit: a lien release after every payment. The signed release gets saved with the payment record, so anyone can see which checks have one and which don't. The next check waits until the last one has its release.
October is a good time to open the files. You have three months to collect what's missing before year-end, and before 1099s are due at the end of January.
Builder CFO handles bookkeeping and fractional CFO work for residential contractors and remodelers, and this is part of every month. The sub file gets checked before the first payment goes out, and expiration dates get tracked so nothing lapses quietly. If you'd like to know what's missing in yours, book a 15-minute call.