How to Start a Home Service Business and Subcontract the Work (Around a Day Job)

The side hustle posts on this blog so far offer two choices: do the work on Saturdays, or sell leads to contractors in the evenings. This post is about a third.

You form an LLC and run Google Ads to your own page and phone number. You call each lead back, agree the job and the price, and the customer hires your LLC. Your LLC then hires another company to do the work under a written subcontract. You never pick up a tool, but in most of the law I read, whoever contracts with the customer is the contractor. So this starts with a licensing check, not an ad.

I run VibeAds, which builds Google Ads campaigns for local service businesses. I am not a lawyer and this is not legal advice. It covers about a dozen states, and laws change, so check your state licensing board and your city, and ask a local lawyer before you sign a contract with a customer.

How this differs from selling leads

California's licensing board says a referral service may pass along licensed contractors' details but may not negotiate contracts for them (CSLB fact sheet). Agree the job and the price and you are the contractor. For the models where the contractor answers the phone, read pay-per-lead vs rank and rent and how to start a lead generation business.

Step 1: check the trade and the state

The license follows whoever contracts with the customer

California defines a contractor as anyone who does the work "himself or herself or by or through others" (B&P Code 7026). In Vallejo Development Co. v. Beck Development Co. (1994), a commercial case, a company whose licensed contractors did all the work was still acting as an unlicensed contractor; the court called the licensed subs "irrelevant" (opinion). Florida (489.105), Arizona (32-1101), Nevada (NRS 624) and Massachusetts (142A) word their laws similarly, and Washington lets a specialty contractor sub out only work incidental to its specialty, so plan on general contractor registration and its $30,000 bond there (18.27.010).

The bigger risk is money. An unlicensed contractor generally cannot sue to collect in California, Florida, Arizona or Washington, and a California customer can sue to get back what they paid, even for good work (7031). Never borrow your sub's license number; Florida forbids it (489.127).

Small-job exemptions mostly end when you advertise or sub

California's exemption for jobs under $1,000 ends once the unlicensed person hires anyone to do the work (CSLB bulletin) or advertises as a contractor (7048). Google Ads count as advertising, and Florida's, Washington's, Oregon's and Arizona's small-job exemptions carry similar advertising limits. Some states also make selling home improvement work need a registration: Maryland covers anyone who "performs or offers or agrees to perform" it (8-101), and Pennsylvania and New Jersey register home improvement contractors too.

Step 2: form the LLC and buy its own insurance

The LLC needs the license or registration from step 1 where one applies, a local business license where yours requires one, and general liability insurance in its own name before anyone goes into a home. Tell the agent you subcontract, and read the policy for a subcontractor warranty endorsement: skip a sub's certificate or additional-insured status and it can void coverage for that sub's work.

Workers' comp matters even though you have no employees. Florida (440.10), Pennsylvania, North Carolina (97-19) and California (when the sub is unlicensed) can make the business that subs out work pay for an uninsured sub's injured workers, and a subcontract only gives you a claim against the sub afterward. Collect a current certificate covering the dates of every job.

Step 3: two subcontractors that are real businesses

Two, because one sub is a single point of failure: a no-show on a Saturday with nobody else to call.

Sub to businesses with their own entity, insurance, tools and other customers. A person who works only for you, on your schedule, in your shirt, looks like your employee, and California's ABC test treats a worker as an employee unless the work is outside the usual course of your business, among other things (Labor Code 2775). Let the sub arrive as itself, specify the result, and leave the method to them. Ask an employment lawyer in your state which rule fits.

To vet them, MaidThis founder Neel Parekh told UpFlip in 2023 that he uses a screening call about insurance and licenses, a video call, then a test job.

What the subcontract should say

Have a lawyer in your state write it. I would want:

1. Both parties as legal entities, with the sub's license number, its expiry and tax IDs.
2. A work order for each job: address, scope, price, dates and what done means.
3. Your LLC named as additional insured on the sub's liability policy by endorsement. A certificate of insurance alone does not make you an insured (Connecticut bulletin, 2010), so confirm each one with the insurer.
4. Workers' comp, or the state's exemption certificate.
5. Indemnity for the sub's work as far as your state allows, and a waiver of subrogation.
6. A workmanship warranty, before-and-after photos, and a free return visit when the work misses the standard.
7. When and how you pay, and lien releases where liens apply.
8. Only you discuss price and changes with the customer, and the sub leaves no cards or side quotes.
9. Customer non-solicitation, where your state enforces it.

Collect from the customer yourself and pay the sub in full on the date you agreed. On construction and improvement work, late pay lands on your customer: in California an unpaid sub can put a lien on the home, so the homeowner may pay twice (CSLB).

Step 4: the phone while you have a day job

Every lead rings you, and the callback is most of the job: you qualify the lead, agree the scope and price, and book the sub. Neel Parekh ran MaidThis part time beside a corporate job for two years (Side Hustle School, 2020), and told UpFlip his company closed 60% of requests when it answered and 16% when it did not. That is his claim, not a benchmark. What I would set up:

• A tracking number that rings your cell and plays a recording notice first, since some states need everyone's consent to record a call.
• A voicemail greeting that says when you will call back.
• An ad schedule limited to the hours you can call back within the hour, or an answering service for the rest.
• Written consent on your form before you send any automated texts (FCC). Calling back by hand someone who asked for a quote is the simple case.

Step 5: Google Ads under your LLC's own name

I found nothing in Google's ad policies that rules out Search ads under your LLC's own name for work you subcontract. What they require is that you can deliver what you offer, licenses included: the Misrepresentation policy bars offering services you can't deliver, "including not having the right licenses or qualifications". Never write "our licensed technicians", "our crew" or "insured" unless it is true of your LLC and of every sub you send.

Local Services Ads do not fit: their leads are "only to be fulfilled by you or the vetted technicians of your company" (LSA policies). A Google Business Profile is uncertain too, because Google requires in-person contact with customers (eligibility).

Pricing: the sub's price plus your margin

Your price is the sub's price plus a margin that pays for the ads behind each booking, your insurance, the LLC and your time. Operators on a cleaning forum in 2020 called a 15 to 20% markup normal; that is their claim, not a typical result. A worked example, with made-up inputs:

Price to the customer:        $200 for a house clean
Your sub's price:             $160
Your margin per job:          $40 (a 25% markup on the sub's
                              price, 20% of the customer's)

Month one, $20 a day of ads:
Ad spend:                     $600
Clicks at $7.50:              80
Calls, 1 in 10 clicks:        8
Booked jobs, half the calls:  4
Ad cost per booked job:       $150
Margin on 4 jobs:             $160
Insurance, LLC fees, phone
and software:                 $150
Month one:                    $160 - $600 - $150 = -$590

This is a worked example, not a prediction or a typical result. The numbers are made up to show the math. Many people lose money in the first month, some never make a profit, and your results depend on your trade, city, ad costs and subcontractors.

The line to read is $150 of ads to win a job that leaves you $40. That only turns around if customers book again without another click, the cost per booked job falls a long way, or the jobs get bigger.

Quality control

Your customer hired your LLC, so a sub's bad day becomes your bad review. You quote, you collect, and you call the day after every job. When something goes wrong, send someone back, and never tie the fix to a changed review, which Google's review policy bans. A sub who meets your customer can also hand over their own card and offer a lower price. A non-solicit clause helps where it holds, but owning the customer and paying subs well and on time protect you more.

What kills it

• Selling a licensed trade without the license, and finding out when a customer wants their money back.
• One uninsured sub with an injured worker, which becomes your claim.
• One sub, who does not show on a Saturday.
• Callbacks that wait until evening.
• A markup too thin to carry the ad cost behind each booking.
• An ad that borrows a sub's license, insurance or crew.

Where VibeAds fits

VibeAds builds the Google Ads campaign and the landing page. Pro ($20 a month) and Max ($149 a month) add a call tracking number that rings your phone, plays a recording notice, and records and transcribes each call that connects, plus a CRM for your leads. For this setup it is an ordinary campaign: leave referral mode off, since it is for passing requests to another company, and never enter your sub's license or insurance in Trust Signals. VibeAds does not find customers or subcontractors, and nobody can promise you results from ads.

Do I need a contractor's license if I subcontract all of the work?

In many states, yes, for any trade the state licenses. California counts anyone who does the work "by or through others" as a contractor, and Florida, Arizona, Nevada and Massachusetts word their laws similarly. Small-job exemptions mostly end once you advertise or hire someone to do the job. Check your state licensing board and city, and ask a local lawyer; this is not legal advice.

Is subcontracting the work the same as a referral service?

No. A referral service passes the customer to a contractor who signs the contract and gets paid directly. In the subcontract setup your LLC agrees the job and the price, signs the customer and answers for the result, which makes it the contractor.

Can I run a subcontracted business with a full-time job?

Only if you can return calls quickly, because every call rings you. Limit the ad schedule to hours you can call back within the hour or pay an answering service. It is harder on a day job than pay-per-lead, where the contractor answers.

Can I use Google Local Services Ads if I subcontract the work?

Probably not. Their leads must be fulfilled by the advertiser or its own vetted technicians. Ordinary Search ads under your LLC's own name fit better, as long as the LLC holds the licenses its state requires.

The five-day plan for this setup

The free plan on the side hustle page has a path called "I'll run the business and sub out the work", with five emails written for it, starting with which trades your LLC can sell and sub out.

Every post for this audience lives in the Side Hustle section of the blog.