Does your state require that you carry a surety bond, often called a contractor's license bond? Are you aware of many different requirements for each state? As a company it's important that you discover how to obtain your contractor bond and why you're required to carry it.
First and foremost what's a contractor's license bond?
A contractor's bond is purchased by a company as a guarantee for their clients of the compliance with state laws. This gives the client with financial assurance. The particulars of the size, what can cause a payout and what other forms might be required change from state to state.
Contractor's License Bonds might be similar from state to convey; however, there are essential differences and requirements that should be understood. As an example:
Arizona -
- License bonds are required by the Arizona Registrar of Contractors
- An attachment is needed to cover damages as a result of noncompliance with license standards
- Bonds vary by size from $2,500 to $90,000 dependant on their license type and how much level of work a company performs
- Contractors that have conducted business in Arizona at under per year are also required to obtain a Sales Tax Bond.
California -
- License bonds are required by the California Contractors State License Board (CSLB)
- An attachment is needed to cover damages due to violations of the Contractors License Law
- All contractors license bonds are for $12,500
- Responsible Managing Employees and Responsible Managing Officers that own significantly less than 10% of the business enterprise are required to obtain another $12,500 bond
- The CSLB may demand a separate Disciplinary Bond for contractors who have been disciplined; the amounts of these vary.
New Mexico -
- License bonds are required by the New Mexico Regulation & Licensing Department
- An attachment is needed to pay for cost to repair building code violations
- All contractors license bonds are for $10,000
Nevada -
- License bonds are required by the Nevada State Contractors Board (NSCB).
- An attachment is needed to cover willful and deliberate violations of a structure contract along with employees damaged by a contractor's failure to pay for wages
- Vary by size from $1,000 to $50,000 and are set by the NSCB. Their decision is founded on such factors as type of business, experience and monetary limit granted.
- Residential pool and spa contractors must obtain a consumer protection bond. The amount, also set by the NSCB, varies from $10,000 to $400,000
Oregon -
- License bonds are required by the Oregon Construction Contractors Board (CCB) and the Oregon Landscape Contractors Board
- An attachment is necessary in the case the contractor is ordered by the CCB to pay for damages as caused by a CCB final order
- Vary by size from $3,000 to $75,000 dependant on their license endorsement classification along with how much level of work a company performs. Contractors that focus on public works projects bigger than $100,000 must obtain a $30,000 Public Works Bond. invest in premium bonds
Washington -
- License bonds are required by the Washington State Department of Labor & Industries
- Required to pay for unpaid wages, unpaid material suppliers, unpaid taxes to the State of Washington and to cover damages as a result of breach of contract
- Vary by size from $4,000 to $12,000 depending on the type of contractor
If your state requires a license bond, there are other bonds that may be required by the project you're bidding on.
Other kinds of contractor's bonds:
Bid Bonds - Submitted by the contractor along with his bid for a particular project. Usually 5-20% of the sum total bid. A bid bond protects projects from contractors that have bid too low and discover which they cannot meet their bid obligations.
Performance Bonds - This kind guarantees contract performance by the contractor. The surety company's capital and surplus back this guarantee around the financial limit of the bond.
Payment Bonds - Guarantees that the contractor can pay certain bills for labor and materials. The surety company backs this guarantee around the financial limit of the bond.
