Starting a career as a contractor looks like a smart move right now. There is a building boom on the horizon as society recovers from the pandemic, replaces aging infrastructure, adopts green energy, and lays the groundwork for the future. All signs suggest that America will need lots of new contractors who can expect steady, lucrative work for years to come.
If this sounds appealing to anyone looking to start or switch careers, you will need to know how to become a contractor. Acquiring the right skills and tools is only part of the process. You must also meet legal requirements imposed by the state agencies that regulate the construction industry. You can’t work as a contractor until you meet these requirements, so start planning immediately with the help of this step-by-step guide.
Step 1: Plan Your Path
There are hundreds of different kinds of contractors involved with everything from plumbing and HVAC to building roads and erecting skyscrapers. The term contractor can apply to almost any specialist in the construction industry. But it also applies to general contractors who work in multiple specialties at once.
Before you can figure out how to become a licensed contractor, you need to determine what kind of contractor you plan to be. Your skills and interests will be important to consider as well as the compensation and growth prospects in different parts of the construction industry. Since you’ll be going through the trouble to obtain a contractor’s license, which takes time and money, you will want to stick with whatever kind of contracting you ultimately choose. Take your time deciding.
Once you know what you want to do, study how to become a contractor in that field. We will cover the general steps to follow here, but it’s important to know the details. The state agency that regulates your kind of contractor will be the best source for accurate, up-to-date information. Talking with employers, unions or other contractors active in that field can be informative as well.
Step 2: Meet the Education Requirements
All licensed contractors will need to have a high school diploma or GED. A college degree is not required, but there can be advantages for getting one before becoming a contractor. Depending on what you study, you will gain knowledge and experience that will help you excel in your contracting career. Some of that experience may even count towards the state contractor’s license requirements.
Those requirements vary by state, but all require contractors to have a minimum amount of verifiable experience working alongside licensed contractors on real construction projects. The specifics of what does and doesn’t count as experience can get complicated. Typically, contractors need no less than three years of experience to get a contractor’s license.
Step 3: Complete Your Training
Many states require contractors to complete a training course or pass an exam (or both) to become eligible for a license. Every state sets its own requirements, and some are much more extensive than others, so it’s helpful to contact your state contractor licensing board directly. They will have good information along with resources to help you complete training and register for exams.
Training and exam requirements can relate to the specific skills or services you provide – eg. carpentry, electrical work, etc. They can also apply to the state and local building codes that contractors will need to follow, the ethical standards and legal requirements they must comply with, and the health and safety practices they must abide by. Some contractors even undergo required training in business management.
Step 4: Structure Your Business
Contractors are businesses, not individuals, in the eyes of regulators. That’s why you will need to have the basics of your business set up before you can apply for a state contractor’s license. First, decide what kind of business entity to operate as:
- Sole Proprietor
- Partnership
- Limited Liability Corporation (LLC)
- Corporation
Some people consult with a lawyer or accountant before choosing a business entity because it has long-term implications for the business. Consider the pros and cons of each option extensively. You will also need to register a trade name for your business and request an Employer Identification Number if you plan to hire other people.
This can also be a great time to plan other aspects of the new business even if it’s not part of the license requirements. Getting a jump start on things like accounting, marketing, and other things every business needs makes success more likely after getting a license.
Step 5: Obtain a Surety Bond
One of the most important (and misunderstood) parts of the license process is obtaining a surety bond. Surety bonds hold someone (called the principal) accountable for illegal or unethical actions that cause damages to another party (called the obligee). That obligee may file claims against the surety bond that are guaranteed to be paid by the company (called the surety) that backs the bond. The principal must then repay the surety with interest and fees added to the debt or have it sent to collections.
States require contractors to get surety bonds because bonds create an incentive to follow state construction laws. And if someone doesn’t follow those laws, surety bonds hold them liable and guarantee damages to their victims. Even though surety bonds create extra costs and risks for contractors, they also build trust in the construction industry and individual contractors. Surety bonds benefit everyone.
State agencies decide how large the bond must be. Getting one involves the following:
- Find a reputable surety agency that serves contractors in your state.
- Complete a surety bond application, supplying info about your background, finances, and business interests.
- Agree to a credit check.
- Provide a copy of the specific surety bond requirements.
- Work with underwriters to meet any other information requests.
The surety will quote the bond cost based on your application and credit history. You should expect to pay a small percentage of the bond’s total value, with lower credit scores leading to high bond costs. Fortunately, resources like the bad credit surety bond program from Viking Bond Service help more contractors get approved at fair rates. Pay the quoted price to activate bond coverage and plan to keep coverage active for as long as you have a contractors’ license. Any lapses in bond coverage make a license invalid.
It’s important to distinguish between two different surety bond types: A contractor license bond and a contractor bond. The first holds you accountable for illegal behavior and is mandatory for getting a contractor’s license, whereas a contractor bond holds you accountable for contractual violations. It’s also often required by project owners before hiring a contractor. Focus on getting a contractor license bond to start, but be prepared to get contractor bonds later on.
Step 6 – Apply for a Contractor’s License
Having met all the previous steps, you are ready to apply for a contractor’s license. How that process works depends on the state, but you should expect to complete an application and provide proof of the following:
- Your registered business entity
- General liability insurance
- Worker’s compensation insurance
- Contractor license bond
Licensing fees range from $50 to $200 and, like surety bonds, also require renewal on an annual or biannual basis.
Viking Bond Service – A Long-Term Bond Partner
Surety bonds are a fact of life for contractors. You will need to obtain a bond at the start of your career and keep it for the duration. Along the way, you may need additional surety bonds for each project you sign a contract to complete. That’s why it helps to have a surety agency you can always trust to meet your bonding needs.
Viking Bond Service has a stellar reputation for its years of service to contractors across the country. We help contractors get all the bonds they need in all 50 states, taking all of the confusion, hassle, and inflated cost out of the process in order to easily meet bond requirements.
Request a no-obligation, free quote to explore how much a bond will cost. Expect a quote in under 24 hours and you can choose to start bond coverage immediately. For additional questions on surety bonds or how to become a contractor, contact us in writing or call 1-888-2-SURETY (1-888-278-7389).