Becoming a licensed construction contractor is often the next step toward career growth for many construction professionals. For those who have construction experience combined with a desire to work on more projects, getting a contractor license is a necessary part of moving forward. A construction contractor must hold a license to be able to take on public and private jobs over a certain amount in nearly all states, but there are other required components such as surety bonds and insurance that help protect customers and job owners along the way.
Before becoming a licensed contractor, take advantage of resources to help understand these requirements.
Understanding Licensing Requirements
To operate a business as a construction contractor, a contractor license is usually required. However, the license requirements and process for obtaining a license vary depending on the locality and type of construction work. This in-depth guide on how to obtain a contractor license is a valuable resource. The guide covers how to determine the type of contractor license needed, who to contact for state-specific licensing requirements and legal requirements.
Contractor Licensing by State
Specific requirements vary by state. Once a location is established, check license requirements by state based on the type and value of work. Information for both residential and commercial contractor licenses are provided, if the state has a distinction between the two types of jobs.
Contractor Bond Requirements
most states, getting a contractor license not only requires an application process but it also includes the need for a contractor license bond. A surety bond is an agreement between the contractor, the surety agency and the project owner that work will be completed as promised. If not, the surety agency pays the job owner for any damages caused, and the contractor must repay the claim amount. This works as a form of insurance, and is an added but necessary cost of getting a contractor license.
Depending on the type, there are several resources for understanding contractor bond requirements. Start with the state-specific information and follow that up with learning about the various types of bonds. That could be a performance bond, a bid bond or a general contractor bond.
Training and Exam Prep
Part of the licensing process is having the right combination of industry experience and formal training. These requirements vary by state, but in general, a construction contractor needs to have a high school diploma or college degree, specific training in any specialty trades such as plumbing or electrical work, and pass a pre-licensing exam. Online courses can help with exam preparation.
Business Tools and Resources
Finally, while not required in each state, construction contractors may need to establish a business structure as part of the licensing process. Determining which business entity is the right one can be a challenge, as can going through the necessary steps to ensure it is set up correctly. Fortunately, there are several online resources, including the Small Business Administration, which offers many online tools and guides for selecting a business structure and templates for creating a business plan and budget.
The first step in obtaining a contractor’s license is recognizing what the requirements are. This will likely include submitting an application, submitting to a background check, completing certain training or education requirements, and establishing a relationship with a surety bond agent. Follow up by determining if a formal business structure is needed and decide which may be the best fit.
