How to Get a License for Your Construction Company

Why do contractors need a license?

Here are a few of the multiple reasons why licensing is often a necessity rather than an option, including the basic safety of both the contractor and the customer:

• 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, thus protecting 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. [Read more about how virtual reality is changing construction.]

When do you need a general contractor license?

Most states in the U.S. require contractors to have a general contractor license to work legally. Others don’t require any license, no matter what type of work you do. You only need to register with the state contractors’ board or the local department of labor.

In many states, there are a few different types of general contractor licenses. Sometimes, the license you need depends on the value of the job that you’ll be doing. For example, in Arkansas, you need a residential builders’ license for any jobs worth over $2,000, a residential remodeler limited license for work up to $50,000 and a commercial license for all jobs more than $50,000. In Mississippi, you’ll only need a license for jobs with a value of more than $50,000, but in California, you need a license for any job worth over $500.

In other states, the license you need depends on whether you are working on residential or commercial buildings or other types of projects. Some states require licenses for residential work only or remodeling and renovations but not for new build work. 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.

How do you get a general contractor license?

While each state has different requirements for getting a license, here’s a brief list of what you can expect when acquiring a license in most states:

• Proof of work experience, which can range from 2-7 years
• Pass a trade exam, business and law exam or both
• You might need proof of education, which can sometimes replace some years of work experience
• Proof of financial stability and/or a financial bond
• Proof of general liability insurance, especially for licenses that allow you to work at the largest and most lucrative jobs

Most states issue their general contractors’ licenses through either the state contractors’ board or the department for labor, so those should be your first inquiries. It’s also important to check your local county or municipal boards for local licensing requirements.

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 carpenter, painter, roofer or heating, ventilation, and air conditioning technician in your state by checking with your state’s licensing boards and departments. Like with general contractors, you may need to get another license at the local level, through the municipality or the county, so check your local requirements as well as your state requirements.

How do you get a license as a specialty contractor?

You’ll need to check the license requirements for your state to know exactly what to do to get a specialty contractor license. But you might be asked for some or all of these requirements:

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

Most of the states that demand a specialist contractor license require you to apply for just one specialization. That 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?

While a specialty contractor license refers to contractors who are licensed as experts in one particular field, a general contractor license is for those who complete or oversee entire projects. Two types of general contractor licenses exist: Class A general engineering contract license and Class B general building contract license. 

Specialty contractors have Class C licenses and 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 within their niche. Specialty contractors will oftentimes be hired to complete jobs, such as painting or lighting, for projects that general contractors oversee.

Although getting a license requires some effort, there’s no need to be worried. Read up on the requirements for your state and specialization, get the experience and pass the exams that you need and get to work.

Evyatar Sagie contributed to this article.