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
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!