What is a Contractors License?

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Contractor's licenses are issued to qualified general builders and related professionals working in the construction industry. These licenses represent a contractor's ability to meet state guidelines, which often include proof of insurance and other appropriate documentation.


All states requiring contractor's licenses maintain a listing of licensed contractors (general builders, electrical, mechanical and plumbing). These lists are available to the public and can provide a helpful resource when it comes to hiring a qualified and reputable contractor. Laws vary from state to state; laws are also changed frequently, but some general guidelines apply to all states in granting contractor's licenses: proof of citizenship or proof of legal residence, documentation of occupational licenses, a high school diploma or its equivalent, 18 years of age or older, registration with the secretary of state and an explanation of any citations or violations that were the result of construction work.


Local governments (cities and counties) typically require business and occupational licenses of contractors; these licenses are often required before a contractor's license can be issued by the state.


Hiring a licensed contractor has its benefits. The state licensing board, which grants licenses, can serve as a strong ally in disputes; most states have formal dispute-resolution programs. When seeking a contractor for a specific job, a homeowner, business or government entity can ensure that possible candidates are licensed.


Licensed contractors have passed a contractor's license exam that serves as a basic competency test. It also works as a screening tool to help weed out disreputable builders. Specific licenses are issued to tradesmen working in areas such as roofing, electrical and plumbing. Contractors often hire such specialists as subcontractors. In California, for example, 43 different licensing classifications are available.


Hiring only licensed contractors is the first step in ensuring you are dealing with a reputable builder. The California Contractors State Licensure Board lists other ways you can protect yourself from fraudulent workers: Secure three bids; gather at least three references for each bidder and check out work they have done in the past; get everything in writing; ask for certificates of insurance to ensure liability coverage is active; pay no more than 10 percent down, and never pay in cash; maintain a file of all paperwork related to the job.