What is a General Contractor’s License?
A General Contractor supervises and coordinates every aspect of a construction project. They are the ones to enter into a prime contract with the property owner, and they oversee all of the hiring, scheduling, and work of subcontractors such as electricians and plumbers. A General Contractors' License is necessary if you plan on growing your construction business in the future. But the licensing process can be a bit intimidating at first – there are a lot of applications to fill out, fees to pay, and exams to take. How do you make sense of it all?
In this guide, we’ll break down the basics to give you an idea of what’s involved and what you can expect along the way.
The Different States, Different Rules
Keep in mind that different states have slightly different requirements for obtaining a contractor license, so you’ll want to refer to your state’s guidelines before applying. For example, California has far stricter licensing rules than Texas, so don’t assume that being qualified to do contracting work in one state qualifies you to do the same work in another state. Each state usually has a regulatory board that handles all licensing. In some states, it can be referred to as professional and occupational regulation boards, or it can be referred to as contractor licensing boards.
You can’t wake up one day and decide to become a contractor – becoming licensed takes a certain amount of experience. Most states have minimum experience and/or education requirements that you’ll need to meet in order to qualify for a license, usually between 2 and 4 years within the last 10 years.
In addition to having a certain amount of work experience, most states also require contractors to pass a criminal background check. While a prison record does not automatically disqualify you from being able to receive a general contractor license, it’s something to be aware of. Each application is judged on an individual basis, so things like the nature of the crime and the time that has passed since the conviction will be taken into account.
Registering Your Business
If you want to become a licensed contractor, you should also expect to name and register your own business. Without registering your company with the state or other local authority, you can’t legally operate in that area.
To earn your contractor's license, you’ll have to prove that you know what you’re doing. Experience alone isn’t enough – in most states, you’ll also need to pass one or more exams.
For general contractors, these exams will usually cover topics involving business and project management, finance, and business administration. You may also need to take additional skills exams based on the type of work you will be doing in that state. Some different types of exams you may need to take include, home improvement contracting, commercial building contracting, and residential building contracting.
No matter what state license you’re applying for, you’re going to run into contractor license application and testing fees.
While the cost varies from state to state, you’re typically looking at a total of around $300. And that’s if you pass your licensing exam on the first try – if you fail the test and need to take it again, you may end up having to pay those fees a second time.
To make sure this doesn’t happen to you, be sure to prepare by taking an online prep course beforehand.
You should also expect to need proof of liability insurance in order to earn your license. General liability insurance protects your business from claims that involve bodily injury, property damage, and personal injury, which are especially common occurrences in a high-risk industry like construction. As a small business, you simply can’t afford to handle an expensive lawsuit.
The minimum amount of coverage you’ll need varies, so check what your state’s requirements are before you speak with a provider. If your business hires employees, you’ll also need to provide them with worker’s compensation insurance.
Once you’ve submitted your application, had it approved, and earned your general contractor license, that’s all there is to it, right? Not exactly – after two years of business, you’ll probably need to have your license renewed.
The renewal process is much easier than the initial application process because you won’t have to provide any new information unless you’ve changed the name, address, or phone number associated with your business. You will usually have to pay a renewal fee, which can range anywhere from $100 to $400.
You may be charged an additional late fee if you do not renew your license before it expires, so being proactive and submitting your renewal application on time is important.
Earn Your General Contractor License
Obtaining your general contractor license will open new doors for your business, allowing you to take on larger projects and earn more money. At the Contractors Institute, you’ll find the tools you need to navigate the application process and pass your state’s licensing exam on the first try. Our goal is to help you save money and start a rewarding career in contracting as quickly as possible. Sign up for one of our prep courses today to get started!