Start a construction business: market, rules and an hourly rate that holds

Subcontractor, own clients or both

Kofi has fitted kitchens and built interior joinery for a firm for ten years. He wants to start a construction business of his own, and he has three options: work as a subcontractor for a kitchen retailer that already asked him, find his own clients among homeowners, or combine the two. Each choice gives a different rate, a different tax position and a different risk. Many tradespeople make the same move: in the US, 25% of carpenters are self-employed, and the median wage for carpenters was $60,580 in May 2025 (source: US Bureau of Labor Statistics, August 2026).

Below are the market figures, the rules in major markets, the line between self-employed and employee, and a full calculation of Kofi's investment and rate. The amounts are in euro; the logic works in any currency.

The construction market in figures

Two things stand out. Construction is a trade of very small firms: the EU count works out at little more than two people per enterprise. And the market moves with interest rates and housing policy, so a good year says little about the next. For a starter, a spread over several clients and types of work matters more than the headline growth figure.

Rules for construction businesses in major markets

The rules come in three layers: permission to do the work, tax rules written specifically for construction, and building and safety regulations. Each country fills them in differently, and within countries the states and provinces often decide.

• Licence: check the licensing body of your state, province or country, and whether the value or type of the job changes the answer.
• Tax: ask whether construction-specific deductions or a reverse charge apply when you work for other businesses.
• Insurance: public liability is often a condition for getting work from a main contractor; see business insurance.
• Safety: find out who is responsible for safety on the sites where you work.

Rules and thresholds change, so check the official source before your first job and every year after.

Worker status: the risk of misclassification

Construction relies heavily on self-employed people, and tax authorities know it. The principle is the same almost everywhere: the label in the contract does not decide. What counts is how the work runs in practice: who controls how and when you work, who carries the financial risk, and how far you are part of the client's organisation.

• United States: the IRS looks at behavioural control, financial control and the type of relationship, and either party can ask the IRS for an official determination (source: IRS, May 2026).
• Australia: employees work in and are part of a business, while independent contractors provide services to a principal's business (source: Australian Taxation Office, November 2024).
• United Kingdom: the Construction Industry Scheme is for sole traders, partnerships and companies working for contractors, and employees do not register (source: HMRC, October 2026), so the status question comes before the tax deduction.

Subcontracting or your own clients

Worked example: Kofi, a carpenter going independent

Kofi works 46 weeks of 40 hours, so 1,840 hours a year. He expects 1,250 of them to be billable; the rest goes to quoting, buying materials, travel between jobs, administration and tool maintenance. He wants €56,000 a year before income tax as his own pay, including a reserve for pension, holidays and sickness.

Fictitious Firmfocus example. Amounts excluding VAT or sales tax; materials for own clients are invoiced separately. Per-hour amounts are annual amounts divided by 1,250 billable hours.

The mix works, but only just. If homeowners bring 300 hours instead of 500 and Kofi fills the gap with subcontracting, revenue becomes 950 x €52 + 300 x €72 = €71,000, and his own pay falls €4,000 short. With subcontracting alone he would need €75,000 / €52 = 1,443 billable hours, 193 more than he has. That is why he starts with the kitchen retailer for steady hours, and uses the quiet weeks to build a portfolio of photos and reviews for private clients. The method behind this is explained in setting your freelance rate.

Small or larger start

Pitfalls

• Your old hourly wage as the yardstick: as an employee you were paid for every hour; now a third of your hours are unpaid and the van, tools and insurance are yours.
• Everything with one main contractor: steady work until that firm runs into trouble, and then your unpaid invoices and your next month's work disappear together.
• Extra work agreed verbally: confirm every change in writing, with the price, before you start it.
• No buffer for materials: on private jobs you pay suppliers before the client pays you. Ask for a deposit.

Other industries come with other rules; compare them in Starting by industry or return to the overview Start a business.