Who should become a contractor?
Steps to Becoming a Contractor
Step 1: Determine the Type of Contractor You Wish to Become and the Type of License You Need
Step 2: Obtain the Necessary Credentials to be Licensed
Step 3: Register your Business
Step 4: Obtain a Contractor License and a Surety Bond
A contractor is an individual or business entity that is hired to perform a specific job or project, usually related to construction. Contractors are hired on a temporary basis and are usually paid a fee for their services.
Becoming a contractor can be a great career move for several reasons, including the increasing market and industry for contractors and the ease of entry into this field. Let's explore these two reasons in more detail.
Firstly, the construction industry is growing rapidly and many businesses are seeking skilled contractors. This means that contractors are in high demand and can command good salaries.
Secondly, becoming a contractor gives you flexibility and independence. With minimal startup costs and few barriers to entry, contractors can start their own businesses quickly and easily. As a contractor, you have the flexibility to set your own hours and work on projects that you are interested in. You also have the independence to run your own business.This can be especially appealing to those who want to be their own boss and have more control over their work schedule and projects.
Becoming a contractor can be a smart choice for those who are looking for a flexible and profitable career path. With the increasing demand for contractors and the ease of entry into this field, it's a great time to consider this exciting and rewarding profession.
People who are skilled and in a specific construction area, such as plumbing, electrical work, or landscaping are great candidates to become contractors. Aspiring contractors should also be self-motivated, organized, and able to manage their own time effectively. Because being a contractor requires a lot of personal interaction with clients, aspiring contractors should also be skilled in customer service and enjoy talking to different people.
To become a contractor, there are several steps you will need to take. Below are the basic steps to becoming a contractor, which we will go into more detail later.
The first step towards becoming a contractor is to decide the type of contractor you wish to become, which will also dictate the type of contractor license you need to acquire. Unofficially, contractors in construction can be categorized into three main types: general contractors, specific contractors, and mechanical contractors. These contractors differ in the type of work they do and the licenses required to work.
General contractors are responsible for overseeing construction projects and managing subcontractors. They are typically hired to oversee large-scale projects, such as building a new home or commercial building. General contractors are responsible for coordinating all aspects of the construction project, from obtaining permits to hiring subcontractors to managing the budget. In most states, general contractors must have a license to work on construction projects.
Specific contractors are skilled professionals who work in a specific trade, such as electrical work, or roofing. These contractors are typically hired to perform a specific task or set of tasks related to the construction project. For example, an electrician may be hired to install wiring and electrical fixtures in a new home. Specific contractors are required to have a license in their respective trade to work on construction projects.
Mechanical contractors specialize in heating, ventilation, and air conditioning (HVAC) systems, as well as plumbing and piping systems. They are responsible for designing, installing, and maintaining these systems in new construction projects and existing buildings. Like specific contractors, mechanical contractors are required to have a license to work in their respective trade.
Regardless of the type, most contractors are required to have a license to work on construction projects. The specific requirements and the type of license required varies by state. We highly recommend you verify with your local state government that the license you have in mind is suitable for the type of contracting work you intend to perform .The license exists to ensure that the contractor is knowledgeable and skilled in their field and that they have met the state's requirements for operating a construction business.
After deciding on the type of contractor to become and identifying the appropriate contractor license, the next step is to research the state contractor education requirements and take necessary steps to ensure you meet them. Becoming a contractor requires a combination of education, training, and real-world experience, and quite often, these requirements vary state to state. We recommend you check with your local state licensing board to ensure that you meet the minimum requirements. Here are some general guidelines on what to expect from state requirements and on how to satisfy them.
Most states will have some sort of education requirement for aspiring contractors. In some states, a bachelor’s degree is needed, while in others, a highschool diploma is sufficient. If you are still in the process of obtaining your bachelor’s degree, we recommend taking some coursework in architecture or engineering, as these courses can help you become a better contractor.
Another common requirement is that some states will want to see a period of apprenticeship or work experience working under a licensed contractor before granting the license. For example, to qualify for a license in California, applicants must have four years of journeyman work experience.
Attending a contractor school is often a great way to meet the above requirements if you don’t know where to start. Taking courses at a reputable contractor school will teach you the skills and knowledge needed to become a successful contractor. A good contractor school will also help you get the work experience you need to satisfy the licensing requirement. Some states even allow you to substitute work experience with contractor school coursework. Lastly, contractor schools are a great way to meet and network with other aspiring contractors.
Finally, once you’ve satisfied the education and work experience requirements, you will need to pass a state licensing exam to certify you as a contractor. The exam typically covers topics such as building codes, construction law, and project management. Be sure to study for the exam and take practice exams to ensure that you are prepared. Once you’ve passed the exam (congrats!), you are 75% to 80% there, and all that is left to do is to file the necessary paperwork to get your license. We will cover how to do this below.
In all states, contractor licenses are tied to businesses and not an individual. Therefore you will need to register a business if you do not already have one.
Here are the common types of businesses that contractors register.
This is the most common business type for solo contractors to operate out of. A sole proprietorship is designed for solo business owners and requires the least amount of paperwork to get started with. However, this also means that there is a lack of legal distinction between the individual and the business. The owner is the business, meaning that the owner is responsibility for the legal liabilities of the business.
LLCs lie somewhere between a sole proprietorship and a corporation. The business operates as a separate entity from the owner, but there is more paperwork to get the business going. Additionally, LLCs have more filings and fees related to compliance and the cost of insurance/bonding tends to be higher.
Similar to an LLC, corporations operate as an entity separate from the owner so there is no legal liability. Outside of raising outside capital or scaling the business, there is very little reason for contractors to register their business as a corporation as it requires the most amount of paperwork to get started and remain compliant.
Once you decide on the type of business you want to register, you can register the business by filing the necessary paperwork with your state’s secretary of state office. The specific paperwork that needs to be filed will vary depending on your local state laws.
Once your business registration has been approved, you are now ready to file the paperwork to get your contractor’s license.
A contractor license is a permit that allows a person or business to legally perform construction work in a specific state or jurisdiction. The license indicates that the contractor has met the state's requirements for operating a construction business, such as completing the necessary education or training and passing a state exam.
The application process for obtaining a contractor license varies by state, but generally involves the following steps:
Licensing fees for contractor licenses vary by state and type of license. For example, in California, the application fee for a general contractor license is $330, while in Florida, the fee is $249. In addition to the application fee, some states also charge an exam fee, which can range from $50 to $400.
Licensing fees for contractor licenses vary by state and type of license. Be sure to research the specific requirements and fees for your state before applying for a contractor license.
Most states will also require you to provide proof of a contractor license bond, which is a type of surety bond, to be submitted along with your application.
Contractor license bonds are a type of insurance that provides financial protection to customers hiring contractors for construction projects. The purpose of a contractor license bond is to guarantee that the contractor will fulfill their contractual obligations in accordance with the terms of the agreement. If the contractor fails to complete the work as agreed upon or fails to pay their subcontractors and suppliers, the bond will cover the losses incurred by the client, subcontractors, or suppliers.
The pricing of a contractor license bond is based on several factors, including the size of the project, the contractor's credit score, and the contractor's experience and financial stability. In general, the cost of a contractor license bond is a percentage of the bond amount, typically ranging from 1% to 15% of the total bond amount, depending on your credit score and background.
The bond amount required for contractors varies from state to state and is typically determined by the state's licensing or contracting board. Bond amounts can range from a few thousand dollars to millions of dollars, depending on the size and scope of the project.
Contractor license bonds can be obtained through licensed surety companies or insurance agents who specialize in surety bonds. It's important to choose a reputable and experienced surety broker who can offer competitive rates and provide the necessary support throughout the bonding process. If you have any questions about obtaining a contractor bond, feel free to contact our experts. We have brokers licensed in all 50 states, 24/7 service, and the lowest prices with our quote matching guarantee.
To avoid claims against their bond, contractors must fulfill their contractual obligations and ensure that they comply with all relevant laws and regulations. This includes paying their subcontractors and suppliers on time, completing the work according to the agreed-upon schedule, and complying with all safety and quality standards. If a claim is filed against the bond, the contractor is required to reimburse the surety company for the amount paid out, as well as any associated legal fees or expenses.
Sometimes an individual may want to become a contractor, but lack the necessary work experience to be licensed. While becoming a contractor with no work experience can be challenging, here are a few options available to help you get started:
Partner with an RMO or RME: An RMO (Responsible Managing Officer) or RME (Responsible Managing Employee) is a licensed contractor who serves as the qualifying individual for a construction company. By partnering with an RMO or RME, you can leverage their experience and qualifications to obtain a contractor's license. The RMO or RME will be responsible for overseeing the construction work, while you gain experience and build your own reputation in the industry.
Grandfathered contractor licenses: In some states, individuals who have been working in the construction industry for a certain period of time may be eligible for a grandfathered contractor license. These licenses are typically offered to individuals who have been working in the industry for a long time and have a significant amount of experience, but do not meet the current educational or exam requirements for a contractor's license.
Waiver from licensing board: Some states offer a waiver from licensing requirements for individuals who have extensive experience in the construction industry, but do not meet the typical educational or exam requirements for a contractor's license. To qualify for a waiver, you will need to provide documentation of your experience and expertise in the industry.
It's important to note that partnering with an RMO or RME or obtaining a grandfathered license or waiver does not exempt you from meeting all of the legal requirements for operating a construction business, such as obtaining the necessary permits and insurance. It's important to research the specific requirements for your state and ensure that you are operating your business legally and responsibly.
Overall, being a contractor is a great career choice as it allows you to be your own boss and have total control over your work. We hope we were able to help you understand some of the finer details of how to register as a licensed contractor. Please feel free to give us a call if you have any questions about the process or need a contractor license bond.
