How Much Work Can You Do Without a Contractor's License?
Contractor Tips , Posted by Charlotte Smith on
General contractors have the know-how, applied background, and training to get a license for their business. They are responsible for supervising an entire construction project, so licensing is an essential part of the job.
While having a license may not be required in all cases, there are several benefits to having one. In this article, we’ll go over what contractor licenses are, the laws regarding them, and why you should get one.
What is a Contractor License?
A contractor license is one that a contractor receives when they have met the most minimal requirements (insurance and bonding) as required by their municipality or state. A contractor license is often required as a preliminary requirement for the contractor to pull permits for building at their local building department in their state.
What determines the minimum requirements for your business to obtain a license depends on how big the contracting jobs are and the state work is being performed. For instance, in Alabama you’re required to have a contractor's license for any residential project that exceeds $10,000 or commercial project that exceeds $50,000.
Do I Need a Contractor License?
Requirements for a contractor license vary by location and how much work your business performs. Like mentioned earlier, based on where you live or operate your business, you may or may not be required to get a contractor license to perform construction projects.
While some states in the United States require contractor licensing, others require a certification or registration. States like Colorado do not license general contractors directly but rely on the city or county the contractor resides in to do it. Some specialty workers such as electricians or plumbers will need a state-level license to work. It’s a good idea to check state requirements to verify the requirements.
If you or your business are not required to have a license, some states will require you to be registered to perform construction projects. Registration as a contractor is less stringent than licensing. However, it does still require contractors to prove they have insurance and pay a fee. Sometimes the worker may require bonding, but this process doesn’t always ensure that the worker is competent or educated enough to do the job correctly.
What is bonding? Bonding is an arrangement with a third party to protect homeowners from shoddy work or other issues. This is one reason why it’s best to either be licensed or hire someone who is licensed.
Do Subcontractors Need a License?
The requirements for a subcontractor vary by state. Some states require subcontractors to have a license, while others may leave it up to the municipality. However, most states will require a license for working in construction fields. Even if your trade does not require a license, it is crucial to get a business license to ensure that your work is legal. Holding a license also reassures your customers that you are a professional with a certain level of expertise.
We’ll dive into the benefits of licensure more in the next section, but even if you don’t need a contractor license by law, it’s still a good idea to have one.
What are the Benefits of Having a Contractor License?
Going through the licensing process and getting insurance for your business in your state may seem like an unnecessary expense. Although some states do not require contractors to hold a license, there are still several benefits of getting licensed. In each section, we’ll outline some benefits of being licensed as a general contractor.
You’ll Build Your Credibility
Having a contractor license builds your credibility. You must prove your knowledge and experience to get a contractor license. Homeowners looking for contractors to help them, especially for high-risk things like electrical work or plumbing jobs, will want the best contractor to work for them. Having a license will reassure clients that you have the knowledge and experience necessary for helping them with whatever they may need.
You’ll Get More Work
You’ll have a great marketing advantage with consumers in your state who want a trustworthy business to manage their building and renovation plans. You might not be able to compete with the initial price of unlicensed contractors; those who operate without a license have advantages such as not paying for licensing charges or bonds to protect their work.
They also often don’t purchase liability insurance or worker’s compensation insurance. However, once clients have (or hear about) a bad experience with a contractor without a license or illegal general contractor, they’ll want to get a contractor that is credible and licensed.
It’s the Law
General contractors must have a license and insurance in each state to perform business jobs, but it’s up to the states themselves to decide what are illegal handyman jobs when the general contractor doesn’t have a license.
If you work without a license in your state, you are limited in the scope of work or jobs you can perform without getting in trouble with the law. You might have good intentions and only want to renovate a building for your friend or family, but if you work without a license and you go outside the scope of work allowed by law for you, it could get messy. Therefore, it’s always beneficial to get a license to ensure you won’t be performing work illegally.
Getting Licensed Isn’t Difficult
Although it does cost you some time, work, and money to become licensed in your state, it doesn't have to be difficult to get licensed. Contractor Training Center makes it easy with their exam prep courses and reference materials. They even offer consulting and review services to help you They offer things like live seminars, lessons, and training quizzes. Plus, since each state has different license requirements for contractors, each training company has offerings to tailor to each state’s unique license requirements.
You’ll Be a Better General Contractor
Other than the obvious benefits (following the law and getting more clients and jobs), it’s good to get licensed because you’ll have the knowledge and experience for things like plumbing jobs or electrical work.
Therefore, you’ll be able to provide the best possible service. You’ll need to train and work towards getting the right knowledge and experience to get licensed. Once you pass the test, you’ll know the exact laws and requirements for your state to perform every level of handyman services. Your clients will see that you’ve made the effort to become better for them.
The Bottom Line
Becoming a licensed contractor is a great way to expand your business, work on bigger projects, and ensure your business won’t get tangled up in a mess with the law. Although it might not be required for smaller jobs, it’s still a good idea to get licensed to protect both the homeowner and yourself (and your business) during jobs.