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General Guidelines for Acquiring a Contractor’s License
Why a Contractor’s License?
Pursuing a contractor’s license is a worthy aspiration. While there are many individuals out there who do a variety of construction work without a license, choosing to acquire your license will not only ensure you have right standing with the law but will also put you ahead of your unlicensed competition.
Homeowners especially are becoming savvier on why they should choose a licensed contractor and on how to find them. It is in your best interest if you desire to work in a construction related field, to secure a license as quickly as possible. This will ensure you more business and help you avoid fines and even potential jail time, depending on the state you wish to work in.
However, the process is neither simple nor intuitive. Furthermore, every state has different legislation regulating contractors, and even each county and municipality can have its own additional regulations as well.
To help you navigate this process, we have developed a general guide that will help you learn the basics of how to prepare for and apply for a contractor’s license, as well as what resources you should tap into.
Important to Know:
First, it is important to know that, as mentioned briefly above, each state will have its own requirements.
This means that while you may earn a license in one state, that license does not automatically mean you can take work in another state. If you wish to do work out of your state, there may be temporary licenses or permits that will allow you to work in the desired state, but you will need to make sure you learn your options and are prepared for the potential extra expense of purchasing a temporary license.
The NASCLA exam is accepted in 15 states (and more coming online). This is a very popular exam as it will allow you to do work in multiple states. Some of the states that accept NASCLA for commercial construction also accept NASCLA for residential work. States such as North Carolina, Georgia and Oregon allow you to use the NASCLA license for residential projects.
Some state requires that you also get the contractors business law license and pass the PSI exam, in addition to the NASCLA exam. Virginia and Oregon also have a Contractor Pre-License course requirement. We offer all of these classes and can help you get prepared to take all of these exams.
Every state will have its own qualifications, some requiring that you pass exams and have proof of relevant experience and education to get licensed, while others, will not require a license at all.
To find out your state’s specific requirements, you will want to contact your planning and development board, registrar of contractors, or contractors’ state license board (whichever your state has). You can also use online resources such as the Contractor’s License Reference Site to look up the requirements of your state.
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:
- Must be at least 18 years old
- Must be a U.S. citizen or have legal residency status
- Likely must take/pass a criminal background check
- Relevant experience in the field
- Documentation of other occupational licenses you may hold
- Explanation/justification for any citations, violations or liens resulting from previous construction work you have performed
Choose your specialty
If you plan to have a specialty, this is also the point that you need to choose it, especially as it may impact the class of license you seek, as discussed below. However, if you want, you can seek a general contractor’s license and do not have to pursue a specialty.
Again, though, you will want to check your specific state’s requirements to help you determine whether you should seek a specialty license.
Identify the license class you want/needEach state will have its own classification system for contractor licenses. Some create classifications based on the type of work that will be done, while others base their classification on the monetary value of the type of work to be done.
For example, in some areas, a Class A contractor may be permitted to take on jobs of any value, while a Class B contractor may be restricted to projects of $500,000 or less.
In other areas, as in California, Class A licenses could be for General Engineering Contractor while Class B is for General Building Contractor and Class C is a Specialty Contractor license that encompasses many specialty areas.
Once you identify the class of license you need, you will be better equipped to move forward.
Do be aware that fees and required insurance will be determined by the class of license you seek. Also, be aware that once you secure your license, accepting work that falls outside of the class you acquired is against regulations in most states.
Name and register your businessYou will need to register your business with the appropriate state and/or local authorities. This will require that you name it and that the name you choose has not already been taken.
If you intend to have employees, you will also need to get an employer identification number (EIN) from the IRS.
This process will require registration fees, so be prepared to pay those up front.
Pass a background check
Not all states require this, but it is a common enough requirement that you should plan on having it completed before submitting your application.
The next step in the process, if required by your state, is an examination. For some regions, you will have to submit the application just to be allowed to take the licensing exam. For others, you must take the examination first, and then submit your results, along with all the other required information, in the application for the license itself.
While not all states require that you take an exam to become a licensed contractor, most states do. The exam you take, if required, will depend on the class of license you are pursuing.
Most of the states that we serve require a two-part license: Business Law and Technical. You must pass the Contractor Business Law and Project Management exam and a technical exam.
Some states do not regulate contractors. To help learn what exams, if any, you need to prepare for and take, contact the International Code Council (ICC) to find out the specific exams needed for your area.
The Contractor’s License Reference Site also goes into detail about each state’s examination requirements and provides lists of resources to study with.
Submitting the Application:
In most cases, after you pass the examination, you are then ready to proceed with submitting your application for the license and fulfilling all remaining requirements to obtain it.
Be prepared to do the following steps to complete the licensing process:
Complete the required applicationThrough the resources already listed, identify the appropriate contractor license
application and complete it. The contractors’ state licensing board (or its equivalent in your state) should be able to direct you where to find the application and the instructions for completing it.
Again, remember that it may not only be determined by the state you are in, but by the county and even city as well.
You will want to gather all the materials that prove you meet basic requirements, as well as any additional materials required by your area. You will submit the application and supporting documents together in most instances.
Common information that you will need to input and/or include in your application includes:
- Company name, EIN (if relevant) and address
- Contracting class and specialty (if relevant)
- Company’s incorporation papers
- Certification from the approved agency that you have passed the required contracting exam(s)
- Copies of personal identification
- Proof of citizenship or residency
- Documentation about any prior contracting license you have operated under
- Proof of completed and passed a background check
- Summary and proof of education, training, and experience
- Proof of your insurance and/or bond (you may be permitted to complete this step after applying for the license and being approved dependent upon insurance/bond)
Submit application along with required feesOnce your application is complete, submit it to the agency directed along with the required fees. Often, you can submit it electronically via online or fax, as well as hard copy by mail or in person.
Be sure to also pay attention to whether the application must be notarized or not prior to submitting it.
Once approved, purchase required insurance and/or bondAlmost all that is left now is to wait. Once you are approved, you will then need to satisfy the insurance and/or bond requirements.
The insurance is to protect you from any liabilities and any damages or losses that you may incur during day to day business. You will also have to supply worker’s compensation insurance for your employees.
Some states will also require that you have a surety bond in addition to (or in place of) insurance. This is essentially to protect your clients from loss should you fail to complete a project or do it poorly.
The amount of insurance or bond that you will need will be determined by the location and by the class of your license and type of projects you will do.
Some states will require that you have already purchased the insurance and/or bond and submit proof of coverage as a part of the application process, while others may approve your application on the contingency that you then acquire the insurance within a certain time frame of being approved. Again, be sure to check your specific state’s requirements.
If wanting to work in multiple states, acquire a license for each state or get the NASCLA license which is accepted in 15+ states!
As has been mentioned throughout, each state requires different things for contractors. If you intend to work multiple states, be aware of each state’s requirements and meet the requirements for each to avoid fines and potential jail time.
- We offer Exam Prep for the PSI Contractor Tests
- Let us teach you how to navigate the books to prepare you for the exams
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