To work as a home improvement contractor in any state, a contractor must usually apply for home improvement licensure. States put the licensure process into place as a consumer protection to prevent the scamming of customers by people falsely claiming to be home improvement contractors. Licensing also prevents te performance of low-quality work that could endanger the customer or the structure.
In addition to state licensure, some towns, cities and counties require home improvement contractors working within a municipality to acquire a municipal home improvement contractor license. Projects of a certain value may have less stringent requirements than projects that are high-value. For example, in Tennessee, some contractors acquire home improvement licenses for projects under $25,000. For projects over $25,000, the home improvement business would obtain a contractor license.
Who needs a license?
A home improvement contractor is a business entity that makes or sells home improvements. Sole proprietorships, partnerships, corporations and limited liability companies will all need state licenses. Home improvements include altering, painting, restoring, repairing, renovating, demolishing, modernizing or moving a structure or the property upon which the structure sits. Additional examples of work requiring licensure may include:
- Performing landscaping tasks like laying sod or planting shrubs, flowers and trees
- Installing swimming pools or pouring driveways
- Performing environmental remediation including asbestos, mold or lead removal
- Working as a subcontractor for a home improvement store
- Being an employee of a licensed home improvement contractor who also does odd jobs “on the side”
- Contractors licensed in one state who decide to perform work in a different state
People who are exempt from holding licenses may include:
- Someone who is working on improvements to a family home
- A person working on an improvement for a building owned by a charity or non-profit corporation
- A retailer of home improvement products who does not perform or pay a contractor for installations
- Contractors who work exclusively on commercial properties
- Architects, engineers, surveyors, electricians, plumbers and other professionals who already have separate state licensing even though they work on home improvement projects
What type of business do I have to own?
States will have different requirements for submitting proof of the type of business that you own, and the requirements will be spelled out in the licensure application. If your company is a sole proprietorship or partnership, then you will need a document such as a trade name certificate. Corporations will need certificates of incorporation, and LLCs and LLPs will need certificates of formation. If you use multiple names for your home improvement contracting, then you will also need to submit copies of any alternate name certificates that you possess.
What about bonding and liability insurance?
Most states require contractors to have commercial general liability insurance before they will allow them to apply for licensure. While amounts may differ by state, a good rule of thumb is to secure a policy that pays $500,000 per incident. Contractors will need to prove both that they’ve secured and that they maintain the policy in their names. Proof usually consists of an active policy number, the date the policy was issued, the effective date of the policy and the signature of the policy owner.
Additionally, some states require bonding to show that a business is financially secure. Some examples of proof of financial security include surety bonds, cash bonds, property bonds or irrevocable letters of credit.
How does the application process work?
Typically, a home improvement contractor applies for licensure by completing an application, submitting required paperwork and paying an application fee. Businesses must submit a physical address instead of a post office box address, and they must also check currently licensed home improvement contractors to make sure that the name of their business is distinctly different from an existing licensed business or contractor name.
How much do I have to disclose?
Each state will have its own requirements regarding home improvement contractors who have a previous criminal record. Some states will not restrict licensure, while others may not allow a convict who is on probation to hold a license. Home improvement workers with criminal records may have to work as employees of another company until they finish probation or otherwise meet the criteria for working as an independent contractor.
Additionally, states may also ask questions on the application regarding past judgments against the business. If the application requires complaint records, information about convictions, revocations or unlicensed activities, then the contractor must provide an thorough account of past actions.
What happens when I’m licensed?
Most states require license numbers to be displayed on all advertisements or marketing materials related to home improvement projects. Also, some states may require the use of specific forms and procedures for down payments, written estimates, dates of the project and cancellation policies. When a home improvement contracting business is sold, always check state requirements to register the new owner’s name in a timely manner.
While this article will give a general idea of the licensure process and associated requirements, it is not intended to substitute for checking the laws regarding licensure in your state. Always check into your individual state and municipal licensure requirements before beginning work as a self-identified home improvement contractor.
Tags: contractors, home improvement, insurance, license
