Why A Contractor's License Is Necessary
Every state has its own regulations for contractor license requirements, but there are a few general steps common to most states.
Important To Know
Licensing regulations vary by state, and in some instances, by city/county. It is important you locate your local regulatory authority to verify requirements for contractors that are applicable to you.
Preliminary Steps To Complete Before Applying
While each state does indeed have different requirements, there are still some basics that apply to almost all states. Before you actually apply for your contractor’s license, there are a number of preliminary steps you should/must take, as well as materials you will want to gather:
REGISTER YOUR BUSINESS Most states require you to have a registered business with the state's business regulatory agency. If you don't have a physical presence in the state, you can hire a registered agent to stand as the business address and receive government correspondence and legal mail on your behalf.
CHOOSE THE TYPE OF LICENSE YOU NEED What type of work do you intend to perform? Many states have separate licenses for residential contractors and commercial contractors. If you do specialized work, some states have specialty licenses available as well. You must determine what type of license you will be applying for before you get started to know what to apply for and what will be required of you.
DECIDE THE LICENSE CLASS YOU WILL NEED In many states, you must apply for a contractor’s license of a certain class based on the monetary value of the projects you will be completing in the state. Please note that to obtain a license with higher limitations (or unlimited licenses), states often require more experience as well as proof of financial responsibility and liability. For many states this means obtaining a review of your financial statements completed by a CPA. If you do not have any financial statements due to being a newly formed business, many states will allow you to obtain a surety bond instead to cover this requirement.
PASS THE REQUIRED EXAMS In many states, you must take two exams, a business law exam, and a trade exam related to the type of work you will be doing in that state. Please note that every state's process differs; some states require you to apply before you can sit for the exam, while others require examination results to be submitted with the application. Already hold a contractor's license in another state? Check for reciprocity to ensure your existing license doesn't exempt you from some/all testing requirements!
OTHER POSSIBLE REQUIREMENTS Many states require that you have general liability insurance. Contact your state’s licensing board to determine the exact amount necessary. It is also possible a background check will be an application requirement; note that a criminal record does not necessarily disqualify you from obtaining a license, but your application may be subject to additional review that will result in an increased application processing period.
Examinations
While each state does indeed have different requirements, there are still some basics that apply to almost all states. Before you actually apply for your contractor’s license, there are a number of preliminary steps you should/must take, as well as materials you will want to gather:
BUSINESS LAW In addition to taking an exam on material specific to the type of construction you perform, some states require contractor applicants to pass an exam covering the laws related to running a contracting business in that state.
TECHNICAL EXAM Builders and other specialty contractors are usually required to take an examination discussing building codes and common practices to specific to the type of work their license allows.
Submitting The Application
While each state does indeed have different requirements, there are still some basics that apply to almost all states. Before you actually apply for your contractor’s license, there are a number of preliminary steps you should/must take, as well as materials you will want to gather:
