Construction Licensing Compliance Guide

Construction Licensing Compliance

General Contractor Licensing

Lay a solid foundation for your business by staying compliant

Overview of Requirements

In addition to following building codes and regulations, general contractors in most states must obtain a license from the state board of contractors. Contractors are generally precluded from advertising their firm or performing construction services before having a valid license.

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License requirements for general contractors vary greatly by state. Most states require firms to obtain a contracting license, while other states simply have contractors register their firm with the board. General contractors may need to apply for more than one license classification, as many states offer separate licenses for residential and commercial contracting as well as engineering and building contracting.

Although general contractor licenses allow a firm to perform work across most trades, contractors wanting to take on a project that requires only one trade may need a specialty contracting license for that trade. For example, if a project requires only electrical work, a firm with a general contracting license may need an electrical contractor license before getting started.

In addition to licensing, firms should register with the secretary of state before conducting business in a state. New business entities will file incorporation or formation documents, while firms doing business outside of their home state will likely need to foreign qualify.

Applying for a License

Applying for a general contractor license is a complicated and lengthy process. The order of the licensing process varies significantly by state, but most states require applicants to submit a license application, have a qualifying party pass exams, and submit background checks before a license is issued.

Before the licensing process can begin, contractors should identify a qualifying party for their firm. A qualifying party is an employee or owner who is responsible for overseeing the firm’s construction activities and who meets the education, experience, and skill requirements established by the board. Contractors should also ensure that their business entity is registered and in good-standing with the secretary of state during this stage of the application process. Contractors applying for a general contractor license in a jurisdiction outside of their home state are typically required to foreign qualify their business.

In most cases firms are required to file a license application first, although some states leave this step until after examination. Along with the application form, contractors must submit proof of workers’ compensation insurance, a surety bond, financial information, a fee, and additional information as required.

Once the application is processed, most states require a firm’s qualifying party to pass a series of exams. Qualifying parties for general contractors are usually required to take a business management exam and a trade exam that covers a variety of construction disciplines.

Submitting background checks for the qualifying party and for officers of the firm is typically the final step in the application process.

Reciprocity

General contractors that perform construction services in multiple states need to meet the license requirements of every state they operate in. In some cases, states have reciprocal agreements that streamline the application process for out-of-state licensed contractors.

Reciprocity usually has the greatest impact on exam requirements. Contractors may not need to retake construction trade exams, such as general engineering or general building, depending on the states involved. Although trade exam requirements are commonly exempted, most states require out-of-state qualifying parties to pass an open-book business law exam.

Renewing a License

General contractor licenses are typically issued for a two year time period and must be renewed before expiration. Common requirements for renewal include updating firm information, providing updated financial information, submitting proof of workers’ compensation insurance, and paying the application fee.

Many states require the firm’s qualifying party to complete a stated number of hours of continuing education during the license period. Continuing education refers to educational courses offered during the licensing period on a variety of construction industry topics.

Penalties

Contractors that fail to apply for a required license or fail to renew an existing license are typically subject to penalty fees or sanctions depending on the severity of the violation. In addition to state-level penalties, local governing bodies are often prohibited from issuing building permits to contractors that are not licensed at the state level.

Click on a link below to view licensing information in your state.

Associated General Contractors of America
Professional association providing advocacy and organization for construction firms and workers.

National Association of Home Builders
National association for the promotion of the housing industry.

National Association of State Contractors Licensing Agencies
National organization that represents and promotes the interests of state level contractor licensing agencies.

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