How to Get a License for Your Construction Company

How do you get a general contractor license?

Each state has different requirements for getting a contractor license. While some don’t require a state license to work as a general contractor, the majority have some type of state licensing program.

“It’s important to note that where state licenses are not required, there may be county or city licenses that need to be secured. So, do your homework before you open your doors,” said Chris Fallon, a general contractor and owner of New Jersey-based Fallon Contracting.

If your state or local government does mandate that you have a contractor license, here’s a brief overview of the process to obtain one in most jurisdictions.

1. Research your state or local licensing board’s requirements.

Most states require a qualifying party — in most cases, the business owner — to provide the following documentation to apply for a license:

• Proof of industry experience and/or education
• Proof of business registration
• A passing score on a construction-specific trade exam, business management exam or both
• Proof of financial stability and/or a surety bond
• Proof of workers’ compensation insurance and general liability insurance, especially for licenses that allow you to work at the largest and most lucrative jobs

You can contact your state or local licensing board for specific details about what you will need to apply for your general contractor license.

2. Ensure your business meets licensing requirements.

If you haven’t taken the necessary steps to get licensed — like registering your business with your state or taking the required exams — ensure you complete those prerequisites before applying. You’ll also want to make sure you have valid and sufficient insurance coverage, as well as a surety bond where required.

“In broad terms, [most] states minimally require contractors to carry a general liability policy, which covers accidental property damage and bodily injury to others,” said Fallon. “Other items licensing programs may require is a workers’ compensation policy to cover injury to your employees and/or a surety bond that guarantees a contractor will fulfill the terms of a contract.”

3. File your application.

Once you have your required documentation, complete and file your application with the appropriate state or local agency. You will likely be required to pay an application fee, which can vary by jurisdiction.

4. Complete a background check if required.

Some states require a background check for the qualifying party — and, in some cases, other company officers — before issuing a general contractor license.

5. Receive and maintain your license.

Once all requirements are fulfilled and the application is approved, the state or local licensing board will issue your contractor license. To keep your license valid, you’ll need to comply with any continuing education, insurance and bond requirements. Also, you’ll have to renew your license periodically according to state regulations.

Why do contractors need a license?

Licensing is often a necessity rather than an option, primarily for the safety of both the contractor and the customer. Here are a few reasons why most states require general contractors to hold a valid license:

• Helps with regulation: Licensing helps states keep track of individual contractors and ensure that they are maintaining certain required or preferred contracting compliances.
• Protects customers: Licensing ensures that contractors have the basic knowledge and skills needed to complete work safely and successfully. This protects customers from having to deal with a mishandled or poorly performed job.
• Promotes safety: State regulatory boards for licensing test contractors on various safety measures, such as how to wire an electrical panel or knowing the proper header thickness.

If contractors do not have a license, they can lose jobs and pay fines in some states.

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Keep in mind that other types of sole proprietor business licenses — such as a DBA (for those doing work under a different name than their individual legal name) or an operational license — may also be required.

When do you need a general contractor license?

Most states in the U.S. require general contractors to hold some type of license to work legally. Not every state has a “general contractor” license program. But, they may require another type of state licensure, such as obtaining a home building or home improvement license with similar criteria. Others only require you to register with the state contractors’ board or the local department of labor, with no official license required.

Sometimes, whether you need a license depends on the value of the job that you’ll be doing. For instance, in North Carolina, you’ll only need a license if your projects are worth more than $30,000. But, in California, you need a license for any job worth over $500.

Some states also have different licensing requirements depending on whether you work on residential or commercial buildings or other types of projects. A state’s requirements may also vary for remodeling and renovation work vs. new builds. For example, Minnesota requires a license for residential building and remodeling jobs but not for commercial contractor jobs. However, all contractors must register with the state. Many states have specific classification systems for their contractor licenses, so be sure you are applying for the correct license class.

When do you need a specialty contractor license?

A “specialty contractor” license refers to contractors who are licensed as experts in one particular field. Most states use the Construction Specifications Institute codes to divide construction work into 16 specialties, although California recognizes more than 40 different types of contractors. In these states, specialty contractors like carpenters, painters, electricians and roofers each have different licensing requirements.

You can find out whether you need a license to work as a specialty contractor in your state by checking with your state’s licensing boards and departments. You may also need to get another license through the municipality or the county, so check your local requirements, too.

How do you get a license as a specialty contractor?

As with a general contractor license, you will likely have to meet some or all of these requirements to obtain a specialty contractor license, depending on your jurisdiction:

• Show work experience
• Pass an approved training course and/or trade exam
• Present completed specialist projects
• Show that you are financially solvent
• Place a surety bond
• Show that you have the necessary insurance

Some states that require a specialist contractor license limit you to just one specialization. This means that if you’re thinking of becoming licensed as a carpenter, for example, you’ll have to give up on all electrician jobs. Other states allow you to carry out any specialized work as a “handyman” as long as the value of the job is under a certain amount.

Some states consider being a handyman as a specialist contractor field on its own, but most states don’t classify it as a specialization. In most states, either you’ll be able to work as a handyman without a license or you’ll need a general contractor or remodeler license.

Should I get a general contractor license or a specialty contractor license?

The type of license you need will depend on whether you plan to complete or oversee entire projects or do a specific job as part of a larger building or remodeling project.

General contracting licenses are best if your company is managing all aspects of a renovation or new build. Specialty contractor licenses are often better for contractors who work in a specific niche. Those with a specialty contract license often work as subcontractors or are hired for smaller projects — such as painting or lighting — as part of projects that general contractors oversee.

Tips for succeeding as a general contractor

Aside from fulfilling your state’s licensing requirements, there are a few extra steps you can take to make your contracting business stand out. For instance, Fallon suggested checking with your building material suppliers to see if there are educational or instructional programs for installing the products used in your line of work. “To say your employees are factory-certified installers could be a deciding factor in awarding contracts,” he added.

Finally, Fallon advised anyone who wants to succeed in the contracting industry to be engaged on every level. “I’ve seen a number of businesses fail because the owner had no interest in learning the job from the ground up and seeing firsthand what’s involved in completing a construction project on time and on budget,” Fallon told business.com. “Involving yourself in every aspect of the job will gain you the respect of your crew, your customers and yourself.”

Danielle Fallon-O’Leary and Evyatar Sagie contributed to this article.