While anyone looking to launch a career as a contractor here in California is undoubtedly aware that they will need to secure the necessary licensure before being able to take on any projects, they may be unaware of just how extensive the conditions that must be satisfied in order to secure this licensure really are.
For example, it may come as a surprise to learn that the Golden State requires applicants to post a $15,000 contractor license bond with the Contractors State License Board as a condition of licensure in the absence of cash or certificates of deposit of equivalent value.
For those unfamiliar with the concept of a contractor license bond, it is essentially a contract between a surety company and a contractor warranting his or her compliance with California's Contractors License Law.
For the contractor, this means they are tasked with ensuring that they don't commit any violations of the Contractors License Law that could be treated as grounds for punitive measures being taken against their license.
Should they fail to do this, perhaps neglecting to pay invoices, affected parties (subcontractors, suppliers, employees, property owners, etc.) can file claims against the contractor license bond.
It's extremely important for contractors to understand that the contractor license bond does not function like an insurance policy. Indeed, not only will they be required to compensate the surety company for the losses it incurred owing to their violations, but they will also remain personally liable for their own obligations.
We'll continue this discussion of contractor license bonds in future posts, examining more about everything from their protective scope to simple steps that contractors can take to prevent claims from being filed against the bond.
If you have questions about the process of securing a contractor license, or a complaint is filed against you or your business with the CSLB, consider speaking with a skilled legal professional as soon as possible.