What is a General Contracting License

Obtaining a general contracting license varies depending on where you live. Each state has their own requirements and standards of becoming licensed, as well as different payment fees and types of insurance coverage to operate your business.

The state of New Jersey is laxer in their qualifications for general contracting licensing in comparison to other states. There are no specific educational requirements such as a college degree needed to become a licensed contractor, but there are multiple steps to prove credibility.

We are going to go over the general basics of what it takes to obtain a general contracting license, and how NJ differs from other states in said acquisition.

General Contracting

General contracting is an oral or written agreement between an owner and a contractor for providing service, labor or materials for a construction project.

A contractor is like a store manager. They are responsible for the larger overview of the project, making sure it stays on schedule, hiring subcontractors for specific work, budgeting, documentation and communication between the owner and all parties involved.

In NJ, the Contractors Registration Act requires all contractors who participate in selling or making home improvements to register with the Division of Consumer Affairs. Home improvements includes but not limited to:

> Construction         > Painting               

> Installation            > Demolishing

> Remodeling           > Renovations

> Alterations            > Restorations

Failing to register your business may lead to monetary penalties or possibly criminal charges.

General Contracting License

A general contracting license is a document signed by the government stating the company is allowed to perform specific contracting responsibilities within their operating region. Having a license is imperative in growing a construction business by providing clarity and confidence with your clients.

Differences in Location

Obtaining a general contracting license will vary depending on where you are located. Different states will have different requirements to become licensed. When applying for your license, reach out to the state’s regulatory board to know what qualifications are needed before a license can be provided.

Experience

In most states, a certain level of experience is needed to obtain a contracting license. The average for most states demands 2-4 years of practical experience in contracting before a license can be obtained.

Other states require a Bachelor’s degree in construction management or civil engineering.

In NJ, there are no educational requirements to acquire a contracting license, but they do demand several years of experience in construction and contracting first.

Background Checks

Most states will demand a criminal background check before a license is provided.

Local Authorities

Businesses must register themselves with the local authorities and state before applying for a license.

Licensing Exams

Some states will require you to take one or multiple exams to prove competency. These exams cover several topics such as:

> Business Administration            > Financial Management

> Project Management                      > General Business

Other exams would be based on what services your business will be providing. For instance, if your business is specializing in commercial building contracting, they will have to take an exam going over commercial building management and construction of commercial buildings in comparison to residential.

New Jersey does not require applicants to take an exam for their license.

Application Fees

As with obtaining any license or documentation, there will be monetary fees.

> Application Fee                  > Testing Fee

> Renewal Fee                      > Testing Retake Fee

> Online Prep Course Fee

In New Jersey, the application fee for a license is $110.

Liability Insurance

A contracting business must have liability insurance to earn a contracting license. General liability insurance provides coverage for bodily injury, personal injury, and property damage while working on a job site. Construction is a high-risk occupation and insurance is an absolute necessity for the business.

In NJ, a business owner or landlord must have a minimum of $500,000 in liability insurance for death or bodily injuries. For small, multi family businesses or owner-occupied rental properties, the minimum liability insurance is $300,000.

NJ businesses must also provide workers compensation insurance which covers lost wages and medical bills for work-related injuries.  

Renewal

New Jersey businesses must renew their license every 2-years. Renewal fees cost $125. Late charges may apply.

Applying for NJ Contracting License

Complete and submit the licensing application to the NJ Division of Consumer Affairs. Include with the application:

·        Business name: Name of the business as listed on the company’s insurance certificate and other legal documents.

·        Other Names: Any previous names the business has been known as.

·        Contact Information: The business telephone number, email, and mailing address.

·        Federal Employer Identification Number (EIN): A unique 9-digit number used to identify a business for tax purposes.

·        Proof of Liability Insurance: Certification of insurance coverage offered with the company.

·        Contractor’s Social Security Number

·        Business Partners: Name and contact information of all business partners.

·        Signed Disclosures: A business or owner’s criminal history and civil record.

·        Signed Certification: A signature from the business owner or legal party saying the information being submitted is true.

Payment of $110 must be submitted with the application and all copies of documentation.

Contractors can download all requirements from the NJ Division of Consumer Affairs website.

Department of Banking and Insurance (DOBI)

Businesses who offer financial options and payment plans must register and obtain a license with the NJ Department of Banking and Insurance. An application for this license can be found on the DOBI website.

Surety Bonds

In NJ, it is required that individual or small businesses purchase a surety bond. Surety bonds are contracts between three parties – the principal (business owner), the surety (insurance company) and the oblige (government) which guarantees the completion of work by the principal.

These bonds are designed to reduce the likelihood of financial loss.

To obtain a surety bond, shop around and find a few bonding agents. Research their services and see which agent offers the best services for your business.