Fly Fishing Services Inc

General Contractors and Small Construction Companies Licensing, Bonding, and Insurance

Obtaining a license
Depending on the trade you conduct, your state can require you to obtain a business license. The more specialized trades, such as electricians, plumbers, HVAC contractors, and fire safety contractors, need a license in most states. Other occupations, such as general contractors, do not require a state license to conduct business. An annual fee is usually required for a license, and to apply for a state license, an employee of your company must take a written text. When the employee leaves your company, the license expires, and someone from your company must retake the test. Learn more about bid bond.

Licensing conditions differ greatly on a local basis. Depending on the size of the area, such contractors may be required to obtain a local licence in order to operate there. These licences are normally only good for a year and are reasonably priced.
Your local construction department will be able to tell you what state and local permits you need. Contact the construction department before bidding on any job to make sure you know what you’ll need and how much it’ll cost. All of the contractors on the project are listed on the building permit application, along with their state and/or local licence numbers. They will not grant the permit until any firm on the list is properly approved, and the work will be halted.

Insurance and bonding
Performance and payment bonds, offer bonds, and permit bonds are the most popular types of bonds.
When a general contractor is awarded a work, he must determine which subcontractors must have a performance and payment bond. The general contractor is secured by the subcontractor’s bonds, just like the owner is protected by the owner’s bond.

While performance and payment bonds are two separate types of bonds, they are sometimes referred to as one. A performance bond is simply a pledge from a bonding firm to the project owner that you can complete the project. If you go out of business, fail to comply with the contract papers, or are fired by the owner during the course of a job, the bonding firm must step in and finish the job. The payment bond is identical, except it ensures that you can pay subcontractors and suppliers who supply labour and supplies as part of your contract’s success.

Establish a bonding company relationship with the aid of a professional bonding agent. If you don’t have a bonding agent, call the National Association of Surety Bond Producers at (202) 686-3700 or go to for a list of local agents. To check the company’s credentials, bonding firms will ask for your current and previous three years’ financial statements, as well as the latest unfinished work on hand schedule.

The bonding firm will demand compensation for any expenses they incur to complete the deal or compensate your subcontractors, unlike an insurance company, which has little protection against you until they pay a claim in your behalf. As a result, you’ll be unable to secure a bond unless you have liquid assets, either within the business or personally. These bonds normally cost 1.5 percent to 2.5 percent of the contract’s value.

Bid bonds – A bid bond is typically issued free of charge, but you won’t be able to get one unless you’ve already secured a performance and payment bond, as mentioned above. A bid bond protects the project owner if the low bidder fails to honour his bid within the specified time frame. If this happens, the bonding firm will reimburse the owner for the difference between your offer and the next highest bidder up to the value of your bid bond (typically 5 percent or 10 percent of the total bid). This payment will then be used by the owner to cover the expense and time effect of having to re-award the project to a different company.