Going Self-Employed as a Contractor in the USA: The Complete Checklist
Going self-employed as a contractor in the USA is one of the most common paths to building real wealth in the trades. But without the right foundations, it’s also one of the fastest ways to create stress, tax problems, and legal exposure. This checklist covers everything to do before, during, and after launch.
Before You Start: Legal and Business Structure
Choose your business structure:
| Structure | Pros | Cons |
|---|---|---|
| Sole proprietorship | Simplest, no filing required | Full personal liability |
| LLC | Liability protection, flexible tax | State filing fee ($50-$500) |
| S-Corp | Tax savings on self-employment tax | More complex, payroll required |
Most contractors start as a sole proprietor or LLC. File your LLC through your state’s Secretary of State website. See IRS.gov for the full comparison.
Get your EIN (Employer Identification Number):
Apply free at IRS.gov/EIN. Takes 5 minutes. You need this for opening a business bank account, filing taxes, and hiring.
Licensing and Registration
Contractor licensing in the US is state-regulated – there is no federal contractor license. Requirements vary significantly:
- Some states (California, Florida, Texas) require trade-specific licenses
- Some counties and cities add local licensing on top
- Electrical and plumbing work typically requires a journeyman or master license
Check your state’s contractor licensing board. NASCLA provides a state-by-state overview. OSHA 10-hour certification ($30-$80 online) is increasingly required on commercial projects.
Insurance
Essential coverage for US contractors:
| Insurance | Notes |
|---|---|
| General Liability ($1M minimum) | Covers property damage and third-party injury |
| Workers Compensation | Legally required if you have employees in most states |
| Commercial auto | Personal auto policy invalid for business use |
| Tools and equipment floater | Covers theft and damage of your tools |
Get quotes at Next Insurance, Hiscox, or through a local independent broker.
Tax Setup
Self-employed contractors pay self-employment tax (15.3%) plus federal and state income tax. Set aside 25-30% of gross revenue from day one.
Required actions:
– Pay quarterly estimated taxes (due April, June, September, January)
– Track all business expenses meticulously – tools, truck, phone, insurance, home office are all deductible
– Issue 1099-NEC forms to any subcontractor you pay over $600/year
– Consider a CPA familiar with trades – it typically pays for itself
Frequently Asked Questions
Do I need a business license to be a self-employed contractor?
Most cities and counties require a general business license separate from your trade license. Check your city/county clerk’s website. Costs typically $50-$200/year.
How much should I set aside for taxes as a self-employed contractor?
25-30% of gross revenue is a safe starting point. Use a separate bank account and transfer that percentage from every payment received. See IRS Publication 334 for the full self-employment tax guide.
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