Contractors face some of the most challenging licensing requirements of any profession. Each state handles contractor licensing differently, and the application process is rigorous. Yet construction licensing is valuable for the industry and the public it serves. For the public, licensing helps to ensure that only the most qualified professionals are doing construction work. For firms, licensing is key to pursuing opportunities and expanding into new jurisdictions.
With the right resources, contractors can manage licensing effectively to drive growth and enhance profitability.
What types of licenses are required for construction work?
Broadly speaking, general contractor licenses allow a contractor to pursue multiple types of construction work, while specialty contractor licenses permit just one. Often, general contractors are the prime contractor on the project, contracting directly with the client, and subcontract work in skilled specialty trades such as plumbing, electrical, and HVAC to licensed specialty contractors.
Yet the projects a contractor may pursue with a general or specialty contractor license vary based on the mix of trades involved, the dollar value of the specialty work, and the scope of work, among other project parameters.
Many jurisdictions further divide contractor licenses into classifications based on factors such as whether the project is residential or commercial, total project value, the contractor’s annual revenue from construction, and the scale of the project, which may be measured in anything from building height to number of plumbing fixtures.
Where are licenses required?
Thirty-three states plus D.C. require general contractor licenses. Four additional states lack a general contractor license but require licenses for certain residential construction work. These include Maryland, Massachusetts, New Jersey, and Pennsylvania. Contractors that aren’t licensed at the state level will often encounter county and local license requirements.
Specialty contractor licenses are required in the vast majority of states. The most commonly required specialty license in the United States is asbestos abatement, with 48 states plus D.C. requiring asbestos abatement company licenses. The exceptions are South Dakota and Wyoming. Individual asbestos professionals are also the most heavily regulated at the state level, with more than 200 individual asbestos professional licenses provided in 46 states and D.C.
Most states also require licensing for electrical, mechanical, and plumbing contractors. You can find detailed licensing requirements for all of these professions, broken down by state and license type, in this online Construction Licensing Guide.
When are licenses required?
Wherever contractor licenses are required, they must usually be obtained before offering services, submitting bids or proposals, or performing work. Offering services may include representations made on a wide range of advertising materials, from business cards, letterheads, and websites to social media, vehicle branding, and signage. In addition, many states require inclusion of the license number on all advertising materials as well as bids and contracts.
How hard is it to apply for a contractor license?
For contractors, the licensing process is demanding, designed to ensure that the applicant has the professional skills and the financial resources to complete the intended work. Many state applications run more than 20 pages, and by the time supporting documents are added to the file, the paperwork is substantial.
To qualify for a company license, applicants generally must:
- Have a qualifying party pass exams
- Complete the required license application
- Submit detailed letters of reference and experience
- Submit background checks
- Provide copies of insurance policies
- Provide financial statements
- Secure surety bonds
As part of the application process, companies will generally need to provide a certificate of good standing from their home state. Firms may also need to register with the secretary of state and appoint a registered agent in order to work outside their state of formation.
The qualifying party who earns the license, often referred to as a responsible managing agent, officer, or employee, is responsible for exercising supervision and control over the company’s work. If the qualifying party leaves the company, the company must generally appoint a qualified replacement within a prescribed period or forfeit the license.
How much does a contractor license cost?
State fees for a general contractor license range from $30 in Idaho to $1,050 for a combined general commercial and residential license in Arizona, with an average fee of $225. County, city, and local fees vary widely.
How long will it take to get a construction license?
The contractor licensing process generally takes at least two months. In states with testing requirements, time for applying, sitting for the exam, and receiving results must be factored in. Accuracy is an important element in timing, since any errors can result in a rejected application.
Can someone perform construction work without a license?
As noted above, licensing requirements vary widely from state to state and even from city to city. Each project brings a new set of potential requirements. Where licenses are required, however, doing construction work without a license can bring severe consequences, including penalties, citations, and loss of the legal right to collect payment for the work.
Is there an easier way to handle contractor licensing?
With so many license classifications and requirements to sort through with each new jurisdiction, licensing can be a challenging and frustrating process for construction companies. Contractors can save precious staff hours and ensure better results with appropriate resources, licensing software, and support from experts experienced in the nuances of state contractor licensing.