The Ins and Outs of Construction Licensure
Contractor licensing requirements vary widely from state to state and are very state specific. In some states you have to obtain a contractor’s license before you start work. In other states, such as South Carolina, you have to obtain a license prior to offering to do work, otherwise it is a violation of the licensing laws. Licensing requirements are based on the states’ interest in protecting the health and safety of their citizens by making sure that contractors are competent and financially able to meet their obligations.
Most states require applicants to take exams to demonstrate their knowledge in the particular construction area, such as general contracting, mechanical contracting, residential contracting or a specialty trade. The exams often have a construction law component, testing your knowledge of the state’s laws applicable to contracting. Once the examination is passed, the state usually requires the applicant to prove their financial viability. Depending on the level of capitalization, the applicant will be issued a license with restrictions on the type and/or size project the contractor can perform.
In lieu of an exam, many states allow a contractor to qualify through reciprocity. Again, this differs widely from state to state. Some states may also require business references or require applicants to have qualifying individuals or major officers with a certain level of on-the-job experience.
The state agencies administrating the state’s contractor licensing program again vary widely from state to state. The time frame for the licensing process also fluctuates. Some states can process license applications in less than a week. In other states, the actual “licensing board” has to approve new applications. In these states, license issuance may take several weeks depending on when the licensing board meets to review the applications.
When I’m dealing with licensing issues in a new state, I often go to the “Contractor’s License Reference Site” on the internet. The site provides a state-by-state overview narrative of licensing requirements and what state agency to contact to begin the licensing process. I’m not sure how often the site is updated, but it at the very least, the website can point you towards the correct state agency to make inquiries. The web address is: http://www.contractors-license.org/
The penalty for performing construction work without a proper a license is usually a fine. In many states, an unlicensed contractor may not have the right to sue to collect any balances due under a construction contract. The licensing authority may also issue cease and desist orders preventing you from continuing any work on a project. Another ramification of unlicensed practice is that it may affect your company’s ability to obtain a license in the future. Many licensing applications have questions regarding current or previous disciplinary actions. A licensing board or agency may decide not to issue you a license if you have previously been fined for performing construction work without a license. The bottom line: if you are planning to do work in a state where you aren’t currently licensed, research the state’s licensing requirements before you put in a bid.