After a positive 2015, the US construction industry is certainly set on a good path. With a steadily stabilizing economy, the predictions of growth from $1.0 trillion in 2014 to $1.1 trillion in 2019 paint a bright future ahead.
The timing seems to be right for starting a construction business, especially if you are based in a rapidly developing state like California. Your first step to tapping into the industry’s potential is to obtain a California contractors license.
Being duly licensed and legally compliant with California’s regulations is important for your credibility in the field. That’s quite relevant also in light of the recently formed Labor Enforcement Task Force, which is tracking down ‘underground economy’ in many industries, including construction.
The licensing process is a thorough one, since you have to meet various requirements, including training and getting a contractor license bond. With this to-the-point guide, you will be better equipped to successfully complete your licensing and will be off to a good start.
The basics about your California contractors license
Before we delve into the nitty-gritty details of licensing, let’s look at who needs to get a California contractors license. If you are performing construction work for which the labor and materials cost more than $500, you are required to obtain a license.
The licensing process in the state is run by the California Contractors State License Board. This is the authority that issues licenses and is able to revoke them if contractors do not comply with applicable regulations. The Board’s Blueprint for Becoming a California Licensed Contractor offers full information on the licensing in the state.
Currently, there are 43 California contractor license types, depending on your activities. These include general contractors, as well as specialty contractors such as electricians, plumbers, landscapers and more. If you want to specialize in a certain field, make sure to obtain the right license classification, so you are officially qualified to perform such work.
Most important licensing requirements
It’s important to complete the application form in full, paying attention to all required information and documents, since the Board can reject your application if incomplete. There is a $300 non-refundable fee for submitting it, plus $180 if it is deemed good to review.
To fulfill the licensing requirements, almost all contractors need to go through a training and a state-administered exam in their specialty. However, in some cases you can get a waiver, i.e. if in the last five years you have worked as a qualifying individual for the same classification or have passed the California contractor license license exams.
Besides proving your professional experience, you need to provide fingerprinting, and a criminal background check will be run by the Board. Other important requirements include obtaining proper insurance and a contractor license bond.
Your California contractor license bond
If you’ve never had to get bonded before, it’s worth looking at this licensing requirement before proceeding with it. A contractor license bond, just like all other surety bonds, is asked from contractors in order to safeguard the interests of the state and its citizens.
The bond works like an extra layer of guarantee that the bond principal will follow state regulations governing that trade. Thus, if contractors do not abide by the rules, affected parties can claim a reimbursement up to the penal sum of the bond.
In the case of California contractors, the licensing bond is in the amount of $15,000 as of January 1, 2016. It was increased from $12,500, but the additional $2,500 asked on the bond remove the requirement for contractors to provide proof of financial solvency in that amount.
While this bond amount might sound considerable, in fact, you need to pay only a fraction of it to get bonded. This is called the bond premium and is usually a few percents of the required amount.
Your actual surety bond cost is calculated only after your surety examines your bond application. It needs to check the strength of your business financials in order to assess the risk of getting you bonded. Your bond premium will be lower if you have a good credit score and solid financial statements, but bad credit bonding is also possible.
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With this overview on how to become a contractor in California, you have the basics about obtaining your California contractors license. Ready to start your bonding process? Apply online or call us 866.450.3412 for your free, no-obligations contractor license bond quote. Alternatively, you can contact us via email.