Each state requires contractors to be licensed and bonded, and requirements differ from state to state. General contractors in North Carolina must meet certain net worth requirements or obtain a surety bond in order to apply for a contractor’s license. The first step in determining if a general contractor must obtain a surety bond is determining the type of general construction work and which project limitation amount is desired. Contractors can expect to pay between 1% to 3% of the bond amount as the premium. When applying for this bond, contractors should expect to submit personal and business financial statements.
There are five subcategories of general contractor licenses; building, residential, highway and public utilities, and specialty contractors. Within each subcategory, there are 3 classifications – limited, intermediate, and unlimited types of licenses.
A limited license entitles a general contractor to perform work on any single project up to $500,000. The general contractor must have a total net worth greater than $80,000 or current assets that exceed total current liabilities by at least $17,000. If not, they must obtain a $175,000 surety bond.
An intermediate license entitles a general contractor to perform work on a single project with a value up to $1,000,000. This cost does not include the cost of the land in which the project is being performed or any costs to improve the land. The contractor must have at least $75,000 worth of current assets that exceed their total current liabilities. If that requirement is not met, the contractor will need to obtain a $500,000 surety bond.
An unlimited license entitles a general contractor to perform work without restriction for a single project. The contractor must have at least $150,000 of current assets exceeding current liabilities. If not, they must obtain a $1,000,000 surety bond.