How to Get a Contractor's License

Virtually every small business needs a license to operate. Depending on your location and the type of business you run, you may even need multiple business licenses and permits.

General contractors aren’t excluded from this requirement. Some states may require multiple licenses to operate. Check with your local government to learn the specific licensing requirements for your state and municipality.

Although requirements will vary, there are many typical standards you can expect to meet to qualify for a contractor license. Here you’ll learn why you need a license to operate as a general contractor and some of the requirements you’ll need to meet.

[Read more: Starting a Business? A Guide to Business Licenses and Permits]

Why do you need a license?

Often, licenses are required for contractors to bid on high-value projects or grow their business through hiring or subcontracting. States may require you to apply for two basic types of contractor licenses.

General contractor license

A general contractor license is required for anyone taking the prime contract on a construction project. This license may be necessary depending on the project’s value and whether the project is residential or commercial.

“A contractor license allows you to apply for general contract jobs that pay over $500,” wrote Indeed. “You also need a contractor license if you intend to start your own contracting business, hire subcontractors or advertise your services. This license also allows you to take a wide range of more extensive jobs that a handyperson may not be able to bid for, allowing you to earn more money.”

Subcontractor license

Many states also offer a subcontractor license for companies working under the primary general contractor. Electricians, HVAC technicians, and water, sewer, and gas plumbers are all examples of subcontractors who may need a separate license.

Some states require you to have a license to get general contractor insurance. It’s also a good idea to have a license before you apply for workers’ compensation and liability insurance.

Note that there’s a difference between a license and a business registration. Registering your business with the state simply means you’re listed in the state registry. Licensing usually requires passing a competency test, providing proof of relevant work experience, or verifying your financial records.

Contractor license requirements

While applications vary by state, expect to see some commonalities among licensing requirements. Most states want to see proof of industry experience, as well as passing results from trade, business, or law exams. You may also need to present proof of your financial records, showing your net worth and evidence of general liability insurance.

Many license applications also ask you to take a test to show that you are familiar with your specific trade’s best practices, codes, industry regulations, and business practices. This is to ensure that contractors are ethical and highly trained.

If you’re a new business with no industry experience on record, you can still find ways to operate.

“You can enroll in training programs organized by trade unions and professional guilds,” wrote Indeed. “If you have a degree in related fields such as construction management, it can boost your chances of getting a license before gaining experience.”

Alternately, consider partnering with an experienced, licensed contractor to be grandfathered into their contract upon their retirement. New businesses can also partner with a responsible managing officer or responsible managing employee . These partnerships take advantage of oversight from professional, licensed general contractors to allow new businesses to bid on high-value projects.

[Read more: 5 Costs Every Startup Should Plan For]

License requirements by state

NEXT Insurance has an extensive guide to the state-by-state general contractor licensing requirements. Note that a handful of states don’t have a statewide requirement that general contractors have a license before applying for work, including Colorado, Connecticut, Illinois, and Kansas. Where there is no statewide requirement, contractors are subject to local rules, so check before you apply for a new contract.

How long does it take to get a contractor’s license?

Since license requirements vary from state to state, the time it takes to get your license approved varies too. Some states have specific education or experience requirements that can push out your timeline.

On average, experts recommend that you budget at least two months for your license to be approved or denied. Recent funding changes and workforce reductions have likely pushed that timeline out longer.

Once you’re issued a license, there’s also a limit to how long it’s valid.

“General contractor licenses are typically issued for a two year time period and must be renewed before expiration,” wrote Harbor Compliance. “Common requirements for renewal include updating firm information, providing updated financial information, submitting proof of workers’ compensation insurance, and paying the application fee.”

In addition, renewing your license could require demonstrating your continued education during the license period. Check your local requirements to see if there are courses or certifications you need to keep up to date to qualify for a license renewal.

What are the costs involved in becoming a licensed contractor?

Your licensing costs depend on your state, type of license, and the education requirements as part of the application. For example, applying to be a contractor in California costs between $700 to $1,500, including:

• $450 for the initial application and exam fees
• $200 for the initial license fee as a sole owner or $350 as a non-sole owner
• $32 to $49 for a fingerprinting/background check, plus a $40 Live Scan fee
• $60 to $600 annually for a contractor's bond, depending on your credit score
• $700 to $1,499 if you take an exam prep course

Comparatively, in Arizona, expect to pay $780 to $1,050 for application, license, and recovery fund fees (excluding exam fees). Virginia applicants can budget $345 to $360 for the initial license, plus $20 to $60 for exams and a $25 recovery fund assessment.

Getting a general contractor’s license can be quite expensive, depending on whether you use a prep course or must have a certain type of insurance. There are ways to save: Skip optional prep courses, for instance, and be strategic about the type of license you choose.

Some states offer a license based on project size or specialty. Veterans and military spouses can also explore options in states like Arizona, where the initial license application fee is waived for honorably discharged veterans.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

Your hard work deserves to be rewarded! Apply for our premier small business awards program, the CO—100, to earn national media attention, get VIP access to premium networking events, and potentially be awarded $25,000! Apply and learn more, here.