Blog Posts Categorized: General - Page 6

In Arkansas, both commercial and residential contractors are licensed at the state level by the Arkansas Contractor Licensing Board. Learn how to get a contractor�s license in Arkansas, and get bonded today.

Who Needs an Arkansas Contractor�s License?

Arkansas defines commercial construction as working on structures other than single family residences. However, the definition of �single family residence� is not limited to buildings occupied by one family. In Arkansas, any residential building containing up to four separate units is considered to be a single family residence.

You�ll need a residential builder�s license if you will be working on single family residence construction projects valued at more than $2,000. To remodel or repair single family residences, you�ll need a home improvement license for projects in excess of $2,000.

Any type of construction involving structures other than single family residences requires either a commercial contractor�s license or a light building commercial license.

• Acommercial contractor�s license allows you to work on commercial projects valued at $50,000 or more.
• Alight building commercial license restricts you to working on structures that are no more than two stories high and projects valued at less than $500,000.

If you already have a commercial license, you are allowed to work on residential projects without having to obtain a residential license.

The Licensing Process

The process for obtaining a commercial license consists of these steps:

• Complete the Arkansas Commercial New Application Form.
• Obtain three written references.
• Submit the completed application and the references, along with financial statements, and pay the application fee (currently $100).
• Pass the Arkansas Business and Law exam and submit the score.
• Obtain a $10,000 contractor�s surety bond and submit the certificate.

The only differences when applying for a residential contractor�s license are that a balance sheet (no income sheet) showing one year in business must be submitted�and no surety bond is required.

Why Is a Surety Bond Required?

The state requires general commercial contractors to obtain a contractor�s license surety bond to protect project owners against financial loss in the event that a contractor defaults and fails to complete a project. Requiring such a bond also protects project owners and others against financial losses stemming from a contractor�s unlawful or unethical actions. In short, the bond serves as a contractor�s guarantee to comply with all applicable legal requirements and industry standards.

How Does a Contractor�s Surety Bond Work?

The three parties to an Arkansas contractor�s license surety bond are:

• The Arkansas Contractor�s Licensing Board, which requires the bond and is known as the “obligee” in the surety bond agreement.
• The contractor who is required to purchase the bond and is known as the “principal.”
• The company that underwrites and issues the bond and is known as the “surety.”

Anyone who suffers a financial loss due to the principal�s failure to perform as guaranteed by the bond agreement can file a claim against the bond. The surety will make sure that the claim is valid and, unless the principal pays the claim right away, will pay it on the principal�s behalf.

However, the surety has no legal responsibility to pay claims and will seek reimbursement from the principal. The principal is solely responsible for paying claims.

What Does It Cost?

The annual premium for an Arkansas contractor�s license surety bond is a small percentage of the $10,000 required bond amount. The surety establishes that percentage, the premium rate, based largely on the principal�s personal credit score. If your credit is good, you�ll probably pay a premium rate that�s somewhere in the range of 1% to 3%, or $100 to $300.

Estimating the Cost of an Arkansas Contractor's License Surety Bond

You can rely on Single Source Insurance to get you the bond you need in order to become licensed as a contractor in the state of Arkansas.

Who Needs an Indiana Contractor�s License?

There is no central source of information that will tell you whether or not you need to obtain a license to operate legally as a contractor in Indiana. Some licensing is done at the city level, while the county issues licenses for contractors working in other situations. You�ll need to check with your local government to find out what, if any, licensing requirements exist.

The Licensing Process

Given the number of local agencies regulating the licensing of contractors, there is no one common process. Each jurisdiction has its own rules as to which types of licenses are issued to which types of contractors. Each jurisdiction has its own licensing requirements, procedures, and fees as well.

There are some common elements in many local licensing processes, such as a requirement for worker�s compensation and liability insurance and for the purchase of a surety bond. The details differ, however. For example, applicants for licensing as a contractor in Indianapolis must purchase a $10,000 surety bond, while in Evansville, which licenses all contractors working in Vanderburgh County, a $15,000 bond is required.

Why Is a Surety Bond Required?

A contractor�s surety bond is provides protection for project owners and others who suffer a financial loss because a contractor defaults on a contract and fails to complete a job or acts in an unlawful or unethical manner. The bond provides funds to compensate any injured party that files a legitimate claim against the bond. The fact that a contractor has money at stake in the form of a surety bond is a powerful incentive to conduct business legally and honestly.

How Does a Contractor�s Surety Bond Work?

There are three parties to a contractor�s license bond:

• The government entity that requires the bond and establishes the required bond amount. This is the licensing authority, known as the obligee.
• The contractor required to purchase the bond as a condition of licensing, who is known as the bond’s principal.
• The firm that underwrites and issues the bond, known as the surety.

When a party who incurs a financial loss because of the principal�s actions files a claim against the contractor�s bond, the surety will conduct an investigation to establish the validity of the claim. The legal responsibility for paying valid claims rests entirely with the principal.

However, it�s not always possible for the principal to pay a claim immediately. Often, the surety will step up and pay a claim on behalf of the principal, essentially lending the needed funds to the principal. The indemnification clause in every surety bond contract gives the principal the right to be reimbursed by the principal for all claims paid on the principal�s behalf.

What Does It Cost?

While the obligee establishes the required bond amount, the surety determines the premium rate on a case-by-case basis. What a given principal will pay to obtain a bond is calculated by multiplying the required bond amount by the premium rate.

The surety�s primary consideration in setting the premium rate for a given principal is the applicant�s creditworthiness. A contractor�s personal credit score is a good indication of the level of risk the surety is assuming. A principal with good credit is less likely to incur claims and more likely to reimburse the surety for any claims paid in advance.

If your credit score is good, you could pay an annual premium that is as little as 1% of the required bond amount. If your credit is not good, you should still be able to get bonded but will pay a higher premium rate.

Estimating the Cost of an Arkansas Contractor's License Surety Bond

Our experienced professionals stand ready to help you get the surety bond you need to become a licensed contractor in Indiana. Apply online today, or give us a call to discuss your bonding needs.

Two types of contractor licenses are issued at the state level in Michigan: residential builder licenses and maintenance and alteration (M&A) licenses. Commercial builders, also called general contractors, are only required to be licensed in certain local jurisdictions. Learn how to get a contractor�s license in Michigan with this simple guide.

Who Needs a Michigan Contractor�s License?

The Michigan Licensing and Regulatory Affairs Department issues both residential builder licenses and M&A licenses. The maximum project size you can work on without being licensed is $600.

A residential builder license allows you to build, repair, alter, maintain, or completely remodel residential structures and mixed use structures that house both residential and commercial facilities. You will have to subcontract electrical, mechanical, and plumbing work to a specially licensed professional.

An M&A license allows you to do one specific type of work, such as carpentry, excavation, masonry, or roofing. If you offer more than one of these services, you will need to obtain and M&A license in each specialty. If you work as a general contractor, you�ll need to find out whether the municipalities in which you work require you to be licensed locally.

The Licensing Process

Applicants for licensing as a residential builder of M&A contractor must:

• Be at least 18 years old
• Have a valid Michigan driver�s license or state ID
• Take a 60-hour pre-licensing educational course and pass the licensing exam
• Demonstrate financial stability

Requirements for obtaining a commercial construction license are established at the local level. While there is no statewide requirement for bonding of contractors, some jurisdictions do require certain commercial/general contractors to obtain a bond as part of the local licensing process. For example, St. Clair Shores requires asphalt, concrete, and curb cutter contractors to be bonded, and Oakland requires certain contractors on public works projects to obtain a surety bond.

Why Is a Surety Bond Required?

The jurisdictions that require contractors to purchase a surety bond do so to provide protection for project owners against financial losses stemming from a contractor�s insolvency or unlawful or unethical actions. This is particularly important for public works projects funded by taxpayer dollars. The bond acts as the contractor�s guarantee to abide by all applicable laws and industry standards and provides funds to compensate claimants.

How Does a Contractor�s Surety Bond Work?

Any violation by the contractor of the terms of the surety bond that results in a financial loss can result in a claim against the bond. The surety company will first investigate to make sure the claim is valid. Then, if the contractor doesn�t pay the claim promptly, the surety company will pay it.

However, the legal responsibility for paying claims belongs to the contractor, not the surety company.� So the surety company will pursue the contractor for reimbursement of claims paid on the contractor�s behalf.

What Does It Cost?

If you need to purchase a surety bond as part of the licensing process, you�ll pay a premium that is a small percentage of the required bond amount. The surety company you choose will set the premium rate based largely on your personal credit score. The better your credit, the lower your premium rate will be, potentially as little as 1% of the bond amount.

Estimating the Cost of an Arkansas Contractor's License Surety Bond

If you need to purchase a surety bond to become licensed locally as a commercial/general contractor, apply online or give us a call today, and we�ll get you the best rate possible.

In Alabama, general contractors and certain specialty contractors must be licensed at the state level to work legally anywhere within the state. Learn how to get a general contractor�s license in Alabama with this simple guide.

Who Needs an Alabama Contractor�s License?

The contractors who must be licensed in the state of Alabama are listed below, along with their respective licensing bodies:

• General Contractors – Alabama Licensing Board for General Contractors
• Home Builders – Alabama Home Builders Licensure Board
• Electrical Contractors – Electrical Contractors Board
• Plumbers and Gas Fitters – Alabama Plumbers and Gas Fitters Examining Board
• HVAC Contractors – Alabama Board of Heating, Air Conditioning and Refrigeration Contractors

The Licensing Process

Each of these licensing boards has its own eligibility criteria and licensing process. There are some common requirements, however. For example, all contractors except for general contractors must pass a professional exam in their specialty. And all businesses must be properly registered with the state and have an employer identification number (EIN) or tax identification number (TIN).

In many states, contractors are required to obtain a contractor�s license surety bond as part of the licensing process. In Alabama, the bonding requirement applies only to HVAC contractors, and it is for a performance bond rather than a license bond. However, any contractor may be required by a particular project owner to purchase a surety bond in order to bid on a project or be awarded a contract.

Why Is a Surety Bond Required?

HVAC contractors must obtain a $15,000 performance bond, which functions in much the same way as a license bond. The purpose of the bond is to provide financial protection for project owners and the public against losses caused by the contractor�s unlawful or unethical actions. It incentivizes contractors to conduct business in accordance with all applicable regulations and industry standards.

How Does a Contractor�s Surety Bond Work?

The terms of a surety bond agreement spell out what the contractor must or must not do to remain in compliance. Violating those terms in a way that causes a financial loss gives the �victim� the right to file a claim against the bond and be compensated for that loss.

The first thing that happens when a claim is submitted is an investigation by the surety company that issued the bond. The goal is to determine whether or not the claim is valid and should be paid.

If the surety company deems that the claim is valid, the contractor is legally obligated to settle or pay it. If it�s not possible for the contractor to do that within a reasonable period of time, the surety typically will pay the claim and then seek reimbursement from the contractor. The surety company is held harmless by an indemnification clause contained in nearly all surety bond agreements.

What Does It Cost?

The contractor pays an annual premium to obtain a surety bond. That premium is a small percentage of the required bond amount. The bond amount is established by the licensing authority or project owner requiring the contract. The premium rate is determined by the surety company at the time the bond is purchased by the contractor.

The primary factor considered in setting the premium rate for a given contractor is the individual�s personal credit score. The surety company uses this as an indicator of the risk that the contractor will be slow to reimburse the company for claims paid in advance on the contractor�s behalf. The better the applicant�s credit score, the lower the premium rate, which can be as low as 1% for contractors with good credit.

Estimating the Cost of an Arkansas Contractor's License Surety Bond

Apply online or call Single Source Insurance today for a free consultation regarding your bonding needs.

In Arizona, contractors are licensed at the state level by the Arizona Registrar of Contractors (ROC). There are a number of different license classifications in Arizona, so the first step is to determine which type of license(s) you need. Learn how to get a contractor�s license in Arizona with this simple guide.

Who Needs an Arizona Contractor�s License?

You�ll need to be licensed to perform just about any kind of construction-related contracting in Arizona. The ROC�s website provides a detailed list of the various license classifications along with the experience and exams required in order to apply for each. The major classifications are:

• General engineering contracting
• General commercial contracting
• Specialty commercial contracting
• General residential contracting
• Specialty residential contracting

There are also a number of dual license categories.

The Licensing Process

There are several steps that must be completed before submitting a contractor�s license application to the ROC, including:

• Passing any required examination
• Submitting to a background check
• Obtaining a contractor�s license bond
• Paying required fees

The ROC website provides detailed instructions for each step in the licensing process.

Why Is a Surety Bond Required?

Arizona requires contractors to obtain a surety bond as a condition of licensing. The bond provides protection for the state and project owners who hire contractors against financial loss due to the contractor�s insolvency or unethical or unlawful conduct. Any party who does suffer such a financial loss has the right to file a claim against the contractor�s bond.

In addition to purchasing a contractor�s license bond, residential contractors must also pay into the ROC�s Residential Recovery Fund or post a surety or cash bond in the amount of $200,000.

How Does a Contractor�s Surety Bond Work?

The terms and conditions of the surety bond agreement spell out what the contractor must do to avoid violations that could trigger claims against the bond. When a claim is filed, the surety company will investigate it to make sure that it�s valid and should be paid.

If the contractor doesn�t pay the claim right away, the surety will usually pay it as an advance on behalf of the contractor. However, the surety bond agreement indemnifies the surety company and makes the contractor solely responsible for paying claims. Therefore, the surety will pursue the contractor for reimbursement of any advance payments.

What Does It Cost?

The cost of a surety bond is a small percentage of the required bond amount, which differs depending on the license classification and projected annual gross revenues. The ROC website provides the required bond amounts for each license classification.

The surety company sets the premium rate for each applicant based on the contractor�s personal credit score and financial situation. If your credit is good, you will probably pay a premium rate that�s in the range of 1% to 3%. Applicants with poor credit will pay a higher premium rate.

Estimating the Cost of an Arkansas Contractor's License Surety Bond

The knowledgeable agents at Single Source Insurance can help you get the contractor�s license bond you need in the required amount and the lowest possible rate. Request a quote today!

In Louisiana, both commercial contractors and home improvement contractors are licensed by the Louisiana State Licensing Board for Contractors. The specific type of license required depends on the work to be performed and the size of the projects to be undertaken. General contractors working on projects of a certain size may hire only properly licensed subcontractors. Learn how to get a contractor�s license in Louisiana.

Who Needs a Louisiana Contractor�s License?

A commerciallicense is required for residential construction with no more than four incorporated or attached residential units if the combined cost of labor and materials exceeds $75,000. With a couple of notable exceptions, subcontractors and specialty contractors must hold a commercial license to work on such projects where the cost of labor and materials exceeds $7,500. Those exceptions are:

• Electrical, mechanical and plumbing contractors, who must have a commercial license to work on projects valued at $10,000 or more for materials and labor, and
• Contractors doing remediation or removal of asbestos, hazardous waste, lead paint, or underground storage tanks, who must have a commercial license for any project valued at $1 or more.

You�ll need to register as a home improvement contractor if you take on home improvement projects valued between $7,500 and $75,000 (not including swimming pools).

The Licensing Process

The registration process for home improvement contractors is relatively simple. It involves completing the Home Improvement Registration application and submitting it to the Board along with certain supporting documents. Home improvement contractors must carry general liability and worker�s compensation coverage, and are required to obtain a contractor�s license bond, regardless of where they work within the state of Louisiana.

Becoming licensed as a commercial contractor does not necessarily involve the purchase of a contractor license surety bond. Only three jurisdictions requires a surety bond as of this writing: Ascension Parish ($5,000 bond), the City of Lake Charles ($7,500 bond), and Gonzales ($5,000 bond).

Why Is a Surety Bond Required?

A surety bond protects the state, project owners, and consumers against financial loss due to the insolvency or the unethical or illegal actions of the bonded contractor. It guarantees that the contractor will conduct business in accordance with all applicable laws and standards, as set forth in the terms of the surety bond agreement. Any violation of the agreement entitles the injured party to file a claim against the bond for compensation.

How Does a Contractor�s Surety Bond Work?

The surety company will investigate any claim filed against a contractor�s bond to ensure that the claim is valid. Ideally, the contractor would immediately pay the claim, but in most cases, the contractor may need some time to gather the funds. Consequently, the surety company will pay the claim and then seek reimbursement from the contractor. It is ultimately the contractor�s legal responsibility to pay all valid claims.

What Does It Cost?

To obtain a surety bond, the contractor pays only a small percentage of the required bond amount. The surety company establishes that percentage, the premium rate, on a case-by-case basis. The primary consideration for the surety company is the contractor�s personal credit rating, which is a good indicator of the contractor�s ability to reimburse the surety company for any claims paid on the contractor�s behalf.

Estimating the Cost of an Arkansas Contractor's License Surety Bond

Apply online or give us a call today to get the surety bond you need in order to obtain a commercial contractor�s license or home improvement registration in Louisiana.

In the state of New York, the only contractors who must be licensed at the state level are crane operators and asbestos removal professionals. However, many municipalities have licensing requirements for general contractors and home improvement professionals. Learn more about how to get a contractor�s license in New York below.

Who Needs a New York Contractor�s License?

Many of the jurisdictions requiring contractors to be licensed are in the �downstate��including counties around New York City, Long Island, and other predominantly urban or suburban areas in the southern part of the state. Few of the upstate counties or cities require contractors other than electrical contractors to obtain a license. Wherever you plan to work in New York, it�s best to check with your local county to find out if there are any unique licensing requirements for the type of contracting you will be doing.

The Licensing Process

Among the counties that do license contractors, there is wide variation in the specific licensing requirements. In general, such requirements may include:

• A completed application bearing the applicant�s Tax Identification Number (TIN)
• Proof of home address
• Proof of Worker�s Compensation insurance
• Fingerprinting and a background check
• A passing score on an exam
• A contractor�s surety bond

The requirements you may have to meet in your particular county or city may be different.

Why Is a Surety Bond Required?

The jurisdictions that require a surety bond do so to protect the public against financial loss resulting from a contractor�s failure to meet all contractual obligations in a lawful and ethical manner.

How Does a Contractor�s Surety Bond Work?

Any party who suffers a financial loss because of a contractor�s incompetence or unlawful or unethical behavior can file a claim against the bond and receive compensation. The company that issued the bond (known as the surety) will investigate to make sure that the claim is valid before it will be paid. The terms of the surety bond agreement make the contractor (known as the principal) solely responsible for paying valid claims.

Often, the surety will go ahead and pay a claim on behalf of the principal, who must subsequently reimburse the surety. This ensures that the claimant is paid promptly and gives the principal time to gather the necessary funds.

What Does It Cost?

The annual cost of any surety bond is a small percentage of the required bond amount. What a particular applicant will pay for a contractor�s surety bond depends on two factors: 1. the required bond amount, which is established by the licensing agency (known as the obligee), and 2. the premium rate the surety assigns to the applicant.

The main thing the surety considers in determining the premium rate for a given applicant is the applicant�s personal credit score. The higher the credit score, the lower the premium rate. Most contractors with good credit will pay a premium rate of between 1% and 3%.

Estimating the Cost of an Arkansas Contractor's License Surety Bond

You can rely on Single Source Insurance to get you the surety bond you need in order to become licensed as a contractor in the state of New York.

In the state of Washington, both general contractors and specialty contractors are licensed through the Department of Labor & Industries, Contractor Registration Section. Learn how to get a general contractor�s license in Washington state.

Who Needs a Washington Contractor�s License?

In Washington, anyone engaged in building altering, remodeling, repairing, or otherwise developing residential properties must obtain a contractor�s license. This includes people who do demolition work or move residential buildings.

The Licensing Process

The licensing process for general contractors is similar to the process for specialty contractors, but only specialty contractors are required to pass an exam. For general contractors, the licensing process consists of the following steps:

1. Obtain an Employer Identification Number (EIN) from the Internal Revenue Service unless you are a sole proprietor with no employees.
2. If the legal structure of your business is anything other than a sole proprietorship, register it with the Washington Secretary of State.
3. Register your business with the Washington Division of Revenue to obtain a Uniform Business Identification Number.
4. Complete an Application for Construction Contractor registration.
5. Obtain a $12,000 surety bond (or Assigned Savings Account) and liability insurance ($250,000 combined per occurrence amount, with the Department of Labor and Industries as the certificate holder).
6. Submit the completed application, surety bond, and insurance certificate, along with the required registration fee to the Department of Labor and Industries, Contractor Registration Section.

Why Is a Surety Bond Required?

A surety bond is the contractor�s guarantee to conduct business in accordance with all relevant laws, regulations, and industry standards as spelled out in the terms and conditions of the bond agreement. The bond provides protection for anyone who might suffer a financial loss because of the insolvency, dishonesty, or unethical conduct of a general contractor. The required bond amount ($12,000) represents the total that may be paid on a single claim against the bond.

How Does a Contractor�s Surety Bond Work?

Anyone who has suffered a financial loss due to a contractor�s violation of the surety bond agreement has the right to file a claim against the contractor�s surety bond. The company that issued the bond (known as the surety) will first conduct an investigation to ensure that the claim is valid.

Ideally, the contractor (known as the principal in the surety bond agreement) will pay any valid claim without delay. More often, however, the surety will pay the claim up front and then seek reimbursement from the principal. An indemnification clause in all surety bond agreements makes the principal solely responsible for paying claims, which means that the surety will pursue the principal for reimbursement of any claims paid in advance.

What Does It Cost?

The annual premium for any surety bond is calculated as a percentage of the required bond amount. The required bond amount is established by the Department of Labor and Industries (known as the obligee in the surety bond agreement), and the premium rate is determined on a case-by-case basis by the surety.

The surety�s main consideration in setting the premium rate is the principal�s personal credit score. The higher that credit score is, the lower the premium rate. If your credit score is good, you will probably pay somewhere between 1% and 3% of the $15,000 required bond amount.

Estimating the Cost of an Arkansas Contractor's License Surety Bond

At Single Source Insurance, our knowledgeable agents will be happy to discuss your bonding needs to help you get the bond required for a contractor�s license. Apply online today.

Who Needs a Georgia Contractor�s License?

Georgia requires contractors who work on projects valued at more than $2,500 to be licensed by the State Licensing Board for Residential and General Contractors, which is part of the Professional Licensing Boards Division of the Secretary of State�s Office. Working on a project valued at more than $2,500 without a license is illegal.

At the state level, there are four basic types of contractor�s licenses in Georgia:

• Residential Basic Contractor (reciprocity with Louisiana, Mississippi, and South Carolina)
• Residential Light Commercial Contractor (no reciprocity)
• General Contractor (reciprocity with 15 other states)
• General Contractor Limited Tier (no reciprocity)

Licenses are issued to individuals and to qualifying agents on behalf of a business organization. Note that there may be additional licensing or permitting requirements at the local level as well.

What Does the Licensing Process Involve?

Each type of contractor�s license has certain requirements regarding work experience, projects, education, examinations, financial responsibility, and insurance. You can access a Comparison Chart spelling out the specific requirements for each type of license on the State Licensing Board’s website.

One of the biggest areas of difference among the four license types is the financial requirements for licensure. There is a net worth requirement across the board: $150,000 for those applying for a General Contractor�s license and $25,000 for applicants for any of the other three license types. However, only applicants for a Residential Basic Contractor or Residential Light Commercial Contractor license are permitted to purchase a surety bond to meet the net worth requirement.

Why is a Contractor�s License Surety Bond Required?

A Georgia Contractor�s License bond in the amount of $25,000 serves several purposes. It:

• Is a valid substitute for proof of personal net worth
• Guarantees that the contractor will conduct business in accordance with the law and ethical standards of the industry
• Provides compensation for any party suffering a financial loss as the result of the contractor�s unlawful or unethical actions

Get Bonded Today

How Does The Bond Work?

The surety bond agreement is a legally binding contract that involves three parties. The licensing board requiring the bond is known as the obligee. The contractor purchasing the bond is the principal. And the company that issues the bond is referred to as the surety. The terms of the agreement spell out the specific responsibilities of each of these parties.

If the principal violates any of the terms and conditions of the surety bond agreement, any party who suffers a financial loss as a result of that violation may file a claim against the bond. The surety will investigate the claim to make sure it�s valid before any further action is taken.

While the principal is legally obligated to pay valid claims against the bond, in many cases the surety will make an advance payment on behalf of the principal. However, the surety will then seek reimbursement from the principal. The advance payment I simply a courtesy to make sure that the claimant is compensated in a timely manner.

What Does It Cost?

The principal will pay a small percentage of the $25,000 required bond amount as the annual premium for the bond. That percentage, or premium rate, is established by the surety on a case-by-case basis. The primary factor considered in setting that premium rate is the principal�s personal credit score. With good credit, the premium rate may be as low as 1% to 3%, but credit-challenged individuals may pay more.

Get The Bond You Need

At Single Source Insurance, we�re here to help you with all of your bonding needs as a Georgia construction contractor. Apply online today!

Who Needs a North Carolina Contractor�s License?

North Carolina licenses contractors in many construction-related fields at the state level. General contractors are licensed by the North Carolina Licensing Board, while electrical contractors are licensed by the State Board of Examiners of Electrical Contractors. There is also a licensing board for plumbing, heating, and fire sprinkler contractors. Some municipalities also require contractors to be licensed in their jurisdictions.

This article focuses on the licensing of general contractors. There are different types of general contractor licenses for 1) building contractors, 2) residential contractors, 3) highway contractors, 4) public utilities contractors, and 5) specialty contractors (18 different specialties).

Each of these general contractor categories is further divided into limited, intermediate, and unlimited licenses, which are differentiated by the extent to which applicants� current assets exceed their current liabilities.

What Does the Licensing Process Involve?

To become licensed in North Carolina, a general contractor must pass a qualifying exam and submit an application and the required fee to the Board. Currently, the fees are $75 for a limited license, $100 for an intermediate license, and $125 for an unlimited license.

Applicants must also demonstrate the necessary level of working capital or obtain a surety bond before they will be issued a license. The required amount of the surety bond depends on the license limitation:

• Limited = $175,000 bond
• Intermediate = $500,000 bond
• Unlimited = $1 million bond

Why is a Contractor�s License Surety Bond Required?

The surety bond is a substitute for proof of net worth to meet the Board�s requirement for adequate working capital. It also serves as a guarantee that the contractor will conduct business in accordance with all applicable laws, regulations, and industry standards. Finally, it provides funds to compensate anyone who suffers a financial loss due to the unlawful or unethical actions of the contractor.

How Does It Work?

The legally binding surety bond contract spells out the responsibilities of three parties:

• The obligee (the licensing board that requires the bond)
• The principal (the contractor who must purchase the bond)
• The surety (the company that underwrites and issues the bond)

The bond contract is very specific about what the principal must do and not do to avoid violating the contract. If the principal does violate the contract and someone suffers a financial loss as a result, the injured party can file a claim against the surety bond.

If the principal doesn�t pay a claim in a timely manner, the surety will pay it, but only as a courtesy to the claimant. The surety has no legal responsibility for paying claims. That responsibility belongs solely to the principal. In fact, an indemnification clause in every surety bond contract holds the surety harmless and gives the surety the right to pursue the principal for reimbursement.

What Does It Cost?

To purchase a surety bond, the principal pays an annual premium that is a small percentage of the required bond amount�typically 1% to 3% for those with very good credit.

Get The Bond You Need

Request a quote today for the surety bond you need to get or renew a North Carolina contractor�s license.