What is a Contractor's License?

A contractor's license ensures that a construction worker has sufficient knowledge and work experience in his or her specific industry. There are stiff penalties and fines imposed in most states for accepting work without a valid contractor's license. Moreover, a valid contractor's license in one state may not permit the contractor to work on projects in a different state.

Qualifications

The required qualifications vary depending on location, but there are some general stipulations that apply to most states. Applicants must be 18 years of age and show proof of citizenship or legal residency in the United States. Two photos must be provided at the time of application. If the applicant is starting a contracting business, it must be registered with the state. Any existing liens or citations from previous construction work must be resolved or explained to the examiner's satisfaction.

Testing

To obtain a contractor's license, applicants must pass a written test on basic skills and principles of business administration and construction law. Depending on the state's individual regulations, an applicant may also have to show proof that he or she will be financially able to run a contracting company. Some states may require written evidence that the applicant has work experience in the construction industry.

Specialization

In addition to the basic contractor's license, many states also require certification for specialized trades. The requirements for each state may differ, but the applicant must usually have a minimum amount of work experience in the designated trade, along with passing a trade-specific test. Some common trade that require a separate certification include plumbing, electrical, hazardous materials, and roofing.

Bonds

Most states require a contractor to obtain a surety bond in order to receive a license. The exact requirements and minimum bond amount vary by state, so check with your home state before applying for a contractor's license. Some states also require a sales tax bond that ensures the contractor will pay the appropriate amount of sales tax each year. The minimum bond amount is based on the contractor's gross income, so it can change from year to year.

Consumer Protection

Potential customers can look up the contractor's license number to make sure that it is valid before agreeing to hire the contractor for a project. License information can be found online or by calling your state's licensing board. The customer can find out about existing complaints against the contractor or get a listing of which specialized trade certifications are held.