North Carolina Contractor License Guide
What Is a North Carolina Contractor License?
If you are a contractor working in the construction industry and want to bid, build, work in project management, or serve as a project superintendent on construction projects worth more than $30,000 in the state of North Carolina, you will have to get a general contractor license.
You can only perform work on projects worth less than $30,000 without a license. If you plan to bid on or perform work on projects worth more than $30,000, you will need to at least secure a limited contractor license. Since handymen generally perform work on projects worth less than $30,000, they generally do not have to get licensed. Similarly, subcontractors who work under the supervision of general contractors do not need licenses since the general contractors have them.
To obtain a contractor’s license, you must submit an application to the NC Licensing Board for General Contractors (NCLBGC), pass the license exam through the National Association of State Contractors Licensing Agencies (NASCLA), and meet other requirements.
To learn more about how to get a North Carolina general contractor license, keep reading.
North Carolina Contractor License Requirements
To get a North Carolina general contractor license, you will need to submit an application. Before you begin the application process, you must meet all of the following criteria:
• Be at least age 18
• Be of good moral character
• Legally register your business with the state of North Carolina
• Pass the NASCLA general contractor’s exam
• Submit financial documents showing that you have sufficient working capital and/or a surety bond guaranteeing your ability to perform and follow the administrative code and the building code
Types of North Carolina General Contractor Licenses
The NCLBGC issues general contractor licenses in the state. The different types of licenses have different classifications and limitations. The classification of your license will depend on the specific type of work you intend to perform, and the limitations of it will specify the maximum value of the projects for which you are licensed to perform work.
License Classifications
Under 21 N.C. Admin. Code 12A.0202, the following classifications of contractor licenses are issued in North Carolina:
• Building contractor license
• Residential contractor license
• Highway contractor license
• Public utilities contractor license
• Specialty contractor license such as for HVAC contractors
• Unclassified contractor license for applicants meeting the requirements of all of the other classifications
You can obtain multiple license classifications with a single application. To obtain the classifications you want on your license, you must pass a qualifying exam. The person who passes the qualifying exam for a license is known as a qualifier and can include an officer, employee, or another staff member of your company.
The company that applies for the license is the licensee, while the qualifier is the person who passes the exam. The qualifiers are not the license holders, and your company can have numerous qualifiers unless you are submitting a license application as an individual. In that case, you will be both the qualifier and the license holder.
If your company only has one qualifier who subsequently leaves your business, you will need to find another qualifier within 90 days so that your business’s contractor license will not expire.
Another consideration for your business is insurance. While North Carolina state does not require general contractors to have insurance in place to obtain their licenses, most building permits and projects will require you to have insurance to bid or work on projects to show financial responsibility. Having insurance also helps to protect your business against liability.
The types of insurance you will need might include workers’ compensation if you have employees and general liability insurance to protect your business from liability related to accidents. You might also want to consider commercial auto insurance to protect your business from liability resulting from accidents involving your construction vehicles while your employees drive them for business purposes.
License Limitations
The limitations on your license determine the maximum contracted project value for which you are permitted to bid and perform work. They include the following:
• Limited license allowing you to work on projects valued at up to $500,000
• Intermediate license allowing you to work on projects valued at up to $1 million
• Unlimited license allowing you to work on projects of any value
The license limitation you might have will depend on your working capital, having a certain net worth, or your ability to obtain a surety bond of a specified amount. You can learn more about the financial requirements in the bonding section later in this article.
How to Get a North Carolina General Contractor License
To secure a general contractor license in North Carolina, you will need to meet the requirements that are detailed below.
1. Register Your Business
Before you can get a general contractor business, you must register your business. You can do so by submitting articles of incorporation or your business plan to the North Carolina Secretary of State. You will also be responsible for submitting the required fees.
2. Submit an Application for a License
Once you have registered your business in North Carolina, you can then submit an application for your license. If you do not have sufficient working capital, you will need to secure a surety bond in the amount required for your license limitation. The following information must be submitted with your license application:
• The license classification or classifications and limitation for which you are applying
• A completed balance sheet
• A detailed, audited financial statement
• Completed questions about your background
• Surety bond as needed based on your license limitation and financials
• Application license fee of $75, $100, or $125 based on your license limitation
You will submit your completed application to the Board. It will be reviewed within about three weeks, and the decision whether you have met the requirements or need to submit corrections will be made.
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3. Pass the Qualifying License Exam
If the Board determines that your application meets the requirements, you will receive an exam eligibility letter in the mail. You will then have to schedule an exam from a vendor. It is a good idea for you to engage in exam prep before taking this test to ensure that you pass it. Most states outsource the contractor exam testing to PSI Services.
Once you pass the exam, the vendor will notify the Board. Your application will then be reviewed again, and the Board will issue your license within about two weeks.
4. Renew Your License
Your general contractor license will expire on Dec. 31 of each year, meaning you will have to renew it so that it is effective as of Jan. 1 of each year. The renewal period will start in October. If you do not renew your license within 60 days of its expiration date, it will become invalid. You will have to pay a penalty of $10 per month for each month your license is expired from Jan. 1 of each year. Renewing your license will also require you to complete continuing education courses.
Why Do I Need a North Carolina Contractor License Bond?
Under 21 N.C. Admin. Code 12A.0702, you will need to get a surety bond as a general contractor if you do not have sufficient working capital or a set net worth, depending on your license limit. If you do not have enough working capital or a high enough net worth as demonstrated by an audited financial statement, you will have to get a general contractor surety bond in North Carolina. The surety bond is a guarantee that you will perform your contractual obligations and comply with the regulations and laws under the North Carolina General Statutes.
The surety bond is meant to protect the state and anyone who might suffer losses when you breach your contractual duties or violate the law. Claims can be filed against your bond in those types of situations. If a valid claim is filed against your bond, you will be ultimately responsible for paying it.
The requirements for a limited license include the following:
• Work performed on projects worth up to a maximum of $500,000
• Working capital of $17,000, a net worth of $80,000, or a $350,000 surety bond
The requirements for an intermediate license include the following:
• Work performed on projects worth no more than $1 million
• Working capital of at least $75,000 shown by an audited financial statement or a $1 million surety bond
The requirements for an unlimited license include the following:
• Work performed on projects of any value
• Working capital of at least $150,000 as demonstrated by an audited financial statement or a $2 million surety bond
How Much Does a North Carolina License Bond Cost?
You will have to pay a premium for a surety bond to secure it. The premium you will pay will be a percentage of your total bond amount.
A surety company will not automatically approve your bond application. Instead, it will consider several factors during the surety underwriting process, including your credit score, experience, available working capital, and your moral character. If you are approved, your rate will depend on these factors. Since a general contractor surety bond will be issued in a high amount, the surety company will want to see copies of your business and personal financial statements to make its decision.
If you have excellent credit, a good moral character, experience, and substantial working capital, the percentage you will have to pay will be much lower. Applicants with credit scores of 700 or higher typically receive the lowest rates on their surety bonds. In some cases, applicants with great credit scores and histories are able to purchase surety bonds with up-front premiums as low as 1% of the total bond amount.
Obtaining a general contractor license in North Carolina requires you to understand the classification and limitation of the license you are seeking and to have strong working capital or a surety bond. When you secure your general contractor license and surety bond, it is important for you to comply with the law and fulfill your contractual obligations to ensure your business’ success. If you fail to do so, you could lose both your bond and your license.
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