Saturday, August 3, 2013, AM | 2 Comments
A California Contractors License Bond is one of several bonds that contractors need in California in order to work.
So, you have decided to become a contractor in California. With the millions of homeowners in the state there is plenty of work to be done, so the market is a great one for contractors that are willing to put in the work and provide clients with quality workmanship.
What you need to be careful of are the bonds that California requires of its contractors.
The failure to have the right bonds can mean serious legal and financial problems for your business, so make certain that all of the bonds are in order before beginning any project.
The first bond that any contractor needs in California is a License Bond. This bond is a general bond that says the contractor will be legally and financially responsible for any project that the contractor begins.
General construction contractors have a very general application to file, while roofers and swimming pool contractors have a slightly modified application, so make sure that you file the correct contractor application form.
In California the License Bond must insure the project with a minimum of $12,500, and if you abandon the construction site for any reason, the surety company must pay the bond to the client to have the project completed. You would then be responsible for repaying the surety company for any expenses that they had to pay the client and you will be in violation of the California Contractors’ License Law.
Once you are fully licensed and have the right bond in place, you are ready to make your first bid. When you make the formal bid, you made need to do so with a bid bond in place, though other clients may not require the bid bond until you are ready to sign the contract.
A bid bond is a statement that says you will complete the project for the price that you bid and the bond gives the client a measure of comfort that you will be able to secure all of the other necessary bonds to complete the project.
If you receive a contract, but cannot provide the performance and/or payment bond, the client may still void the contract, but a bid bond is generally a promise that you will be able to secure the other bonds as needed.
Now that you have the license secured and you have won your first bid, you must present the client with a performance bond before any work can begin.
A performance bond is a guarantee that once you begin the work you will be able to complete the work, as specified in the blueprints and according to the client’s specifications.
The performance bond is a protection for homeowners against contractors who make very low bids but do not have the experience or expertise to finish a job on-time or on budget.
The performance bond is different from a license bond because a license bond only pays out if the project is abandoned, while the performance bond will pay if the work is not completed to the original design specifications.
Homeowners and the state of California use bonds to protect themselves from contractors that try to defraud their customers. As a contractor in California you will need to have all of the right bonds in place, at the right time in order to win contracts and begin work on those projects.
Jack is a free lancer writer and content builder of many sites. He loves to share his knowledge on California Contractors License Bond.