If you want to become a general contractor in the state of North Carolina and engage in construction activity, you will need to get a general contractor’s license if you want to perform work on projects worth $30,000 or more. The general contractor license requirements vary based on your desired license limitation. To obtain a license, you will need to meet several eligibility requirements, secure a contractor license bond, register your business, pass a licensing exam, and apply to the NC Licensing Board for General Contractors at NCLBGC.org. Here is what you need to know about the various types of contractors’ licenses and the general and financial requirements you must meet to obtain your contractor’s license in North Carolina.
Who Needs a North Carolina Contractor License?
Under N.C. General Statutes § 87-1(a), all contractors who wish to perform work on projects worth $30,000 or more must obtain contractors’ licenses. While you can perform work on projects worth less than that amount without a license, applying for and obtaining your license as a North Carolina general contractor can open up more opportunities for you so that you can grow your business. Many project owners also will only do business with licensed contractors so that they can have greater protection in case something goes wrong.
Types of Contractor Licenses in North Carolina
The North Carolina Licensing Board for General Contractors issues different types of licenses to contractors. The agency divides general contractors’ licenses by limitations and classifications. The limitations on your license will be based on the value of the projects you can complete and the financial information you provide with your application. Those in specialty trades, including plumbers, electricians, HVAC professionals, and others will need to get specialty contractor licenses.
The license limitations for NC general contractors include the following:
- Limited license – Authorized to perform work on projects worth up to $500,000; Must have at least $17,000 in working capital, a net worth of $80,000, or a contractor license bond of $350,000
- Intermediate license – Authorized to perform work on projects worth up to $1 million; Must have at least $75,000 in working capital or a $1 million surety bond
- Unlimited license – Authorized to perform work on all projects; Must have at least $150,000 in working capital or a $2 million surety bond
General contractor licenses are also certified in one of the following five classifications under 21 NCAC 12A.0202, which will determine the type of work you can perform:
- Building contractor – building construction and demolition projects
- Residential contractor – residential building construction and demolition projects
- Highway contractor – highway construction projects
- Public utilities contractor – water and wastewater projects
- Specialty contractor – projects in specialty trades such as roofing or others
If you can meet all of the requirements for each of these classifications and pass each of the exams for the respective classifications, you can receive a license with an unclassified classification.
How to Get a NC Contractor License
The North Carolina Licensing Board for General Contractors handles general contractor licenses. Once you meet all the requirements for the type of license and classification that you need, you will submit your application to the NCLBGC in Raleigh, North Carolina. To apply, you will need to submit supporting documents and pass a licensing exam. Here is a checklist of tasks you need to complete before you go through the application process and submit your license application to the licensing board:
- Determine your license classification and limitation.
- Decide if you or someone else at your company will be the qualifier.
- The qualifier will need to take and pass the exam corresponding to the desired license classification.
- Prepare audited financial statements for your company.
- Apply for and secure a surety bond in the amount required for your license limitation as evidence of financial responsibility.
- Choose your legal entity structure and register your business with the North Carolina Secretary of State.
- Apply for a Federal Employer Identification Number (FEIN) from the Internal Revenue Service (IRS).
- Complete the correct application and submit it to the NCLBGC with the correct licensing fees and supporting documents attached.
The license and registration fees are non-refundable. You should pay them by check made out to the North Carolina Licensing Board for General Contractors. The license fees for general contractors include the following:
- Limited license application fee – $75
- Intermediate license fee – $100
- Unlimited license fee – $125
While the state doesn’t require you to purchase liability insurance, you might need to have it under municipal or county requirements. In addition to your contractor license bond for the state, you might also be required to purchase other types of construction bonds to perform work on public projects or as contractual provisions on certain private projects.
Once you submit your general contractor license application with the required fees and documents, it will take the board between two to three weeks to review it. You will be notified by mail of the board’s decision. If you are approved by the board, your qualifier will have to take the contractor license exam. This exam is administered by PSI Exams. The board will also accept the National Accredited Building Exam from the National Association of State Contractors Licensing Agencies (NASCLA) if your qualifier has taken and passed the NASCLA exam or has had an active license in the past four years.
You will also need to get a business license to operate a general contracting company in North Carolina. To get a business license, you will need to register your business with the North Carolina Secretary of State and submit copies of your Articles of Organization, Articles of Incorporation, and Certificate of Authority.
You will also need to meet a few additional requirements to operate your contracting business in North Carolina, including the following:
- Apply for and receive your Federal Employer Identification Number (FEIN) from the IRS
- Apply for your North Carolina State Tax Identification Number from the NC Department of Revenue
- Purchase workers’ compensation insurance
- Register your business with the NC Industrial Commission to pay unemployment insurance taxes
NC Contractor License Surety Bond Requirement
The North Carolina contractor’s license surety bond requirements are found in 21 N.C. Admin. Code 12A.0702. Under this regulation, you must secure a contractor license bond if you don’t have sufficient working capital or a specific net worth based on your license limitation. If your audited financial statement shows that you don’t have enough working capital or sufficiently high net worth, you will be required to get a surety bond under North Carolina law.
The contractor surety bond amounts by license limitation include the following:
- Limited license – $350,000 surety bond
- Intermediate license – $1 million surety bond
- Unlimited license – $2 million surety bond
Your surety bond serves as a guarantee that you will comply with the laws of the state and will perform your contractual duties. Surety bonds are not insurance. Instead, surety bonds protect anyone who you might harm and the state if you break the law or fail to perform your contractual duties.
North Carolina contractor license bonds involve the following three parties:
- Principal – The company or individual who needs the contractor bond to secure a license
- Surety – The bond company that issues the license and guarantees the contractor’s stability, ability to perform work on its contracts, and willingness to comply with and knowledge of the laws
- Obligee – The NC Licensing Board for General Contractors, which requires the bond
You won’t have to pay the face value of the surety bond to secure it. Instead, your bond application will undergo an underwriting process to determine your creditworthiness and degree of risk. If you have excellent credit, financial stability, and a good reputation, you might receive a free quote for your bond premium of as little as 1% to 3%. This is the amount you will have to pay to purchase your surety bond. For example, a $350,000 license bond for a limited license will only cost from $3,500 to $10,500 if you have an excellent credit score, a good reputation, and strong financials and experience. By contrast, if your credit is spotty, you might have to pay a higher rate of up to 10% or more to secure your bond.
If you violate the terms of your bond or break the law, the state or an aggrieved party can file a claim against your bond. While the bond company will pay valid claims up to the penal sum of your bond, you will have to reimburse the surety in full for all amounts it pays on your behalf or face legal liability.
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How Hard Is the NC General Contractor Exam?
You will have to pass the NASCLA contractor exam to obtain your general contractor’s license. This exam tests you on your knowledge of the state building codes in North Carolina, your knowledge about contracting, your ability to apply your knowledge, your knowledge about estimating, and your knowledge about reading building specifications and plans. You will also have to pass an ethics section and demonstrate your knowledge about other construction matters. The exam consists of 90 questions and takes around three and one-half hours. Under N.C. Gen. Stat. § 87-10(b), you must receive a minimum score of 70% to pass the exam. The exam is not easy, so you will need to spend plenty of time preparing for it to ensure that you pass.
Getting a general contractor’s license in North Carolina can open opportunities to perform work on projects worth more than $30,000. While you will have to meet multiple license requirements, including obtaining a surety bond, passing an exam, and others, licensure can help to expand your business.