When working on a contractor project in Washington state, it’s vital that all parties are on the same page when it comes to planning, strategy, and insurance. And it’s also very important to ensure there is a contractors license bond in place. A contractors license bond is a type of surety bond, which protects someone if work isn't completed by a contractor or if there are damages involved. But another factor of a contractor license bond is that it also helps others who are involved and impacted by unethical or costly choices within a business. Keep reading to learn more about the contractor registration process, how contractor surety bonds work in Washington, and other info about contractor insurance.
What is the purpose of this bond?
A contractors license bond protected the following three parties: the contractor, the business who hired you, and the state bond issuing agency. When getting contractor license bonds, that means you’re ensuring that ethical and professional services will always be provided. Another factor is that these license bonds help to also protect the public by ensuring you and the company you’re working for will provide professional services and that no harm will be done to the public. If someone is negatively impacted or there is an unethical decision made, then a claim can be filed against the bond, which can result in financial compensation.
General and Specialty Contractors
Now that you know a little about how surety bonds work, including how contractors license bonds differ, we'll now talk about how they pertain to a general contractor and specialty contractors. If you’re a business that is modifying properties in Washington state, then you will need a Washington state contractor bond. While a general contractor is most common in the state, a specialty contractor also needs a license. These professionals provide services such as appliance work, closet services, door services, and much more.
Electrical and Telecommunications Contractors
Another contractor position that needs a license bond is an electrical contractor. An electrical contractor bond in Washington works similarly to any other surgery bond. If something goes wrong during the electrical project, then the customer can file a claim for financial losses and damages against the bond.
A telecommunications contractor is also common in Washington state. And just like all other contractors, a license bond is needed. However, it's important to note that these specialized licenses are harder to obtain compared to other licenses. This type of contractor license is the equivalent of a specialty contractors license, but getting one of these licenses means you can only work in telecommunications.
Washington Contractors License Bonds Explained
A Washington contractor license bond is needed for any contractor work completed in the state of Washington. A license bond is used to protect the consumer in the event that the contracting work doesn’t go as planned. However, there are different contractors license bond amounts depending on the type of contractor you are, so be sure to do research to find the amount that pertains to your position.
Who needs to post a contractors license bond in Washington?
Many different contractors must post a bond in Washington state. From general contractors to fire system sprinkler contractors, a bond must be obtained by the contractor. Take a look the different types of contractors that must get bonded in Washington state:
The requirements for the bonds vary significantly from one contractor to the next, so be sure to do your homework to find the bond amount that pertains to you.
- General contractors
- Specialty contractors
- Electrical contractors
- Telecommunications contractors
- Structural pest inspectors
- Fire system sprinkler contractors
How much does a Washington contractors license bond cost?
If you’re a contractor in need of a contractor license bond, then you may be wondering how much they cost. In Washington state, the cost of a license bond varies greatly from one position to the next. Take a look at the list below that labels the Washington state surety bond amount needed for the referencing contractor license type:
- General contractor: $12,000
- Speciality contractor: $6,000
- Electrical contractor: $4,000
- Fire sprinkler system contractor: $10,000
What does a contractors bond cover?
Contractors bonds are essentially a promise from the surety company that the bonded contractor will comply with the conditions of the contractor license law in the state of Washington. If the contractor violates their terms, then there are grounds for disciplinary action. A claim can be made by the contractors employees, homeowners, any other person harmed by a willful and deliberate violation of a Washington construction contract, or an express fund damaged as a result of the contractors failure to pay fringe benefits for eligible employees.
How to apply for a Washington contractor license?
Applying for a Washington contractors license is a pretty straightforward process. Here are the steps you’ll need to follow:
Be sure you need a license
To start the contractor registration section of the process, you’ll want to be 100% positive you need a contractors license in Washington. If your business does any of the following, then you’ll need a contractors license:
- Building, remodeling, or repairing property of structures. That includes roads, buildings, etc.
- Demolition/wrecking or transporting structures
- Building residential property of flipping houses
Register with the Washington Secretary of State
When filling out your contractors license registration form, they will ask for your UBI number. The fastest and easiest way to obtain this number is to register with the Washington Secretary of State. To do this, submit Articles of Incorporation (corporations) or a Certificate of Formation (LLCs). If you’re registering a business in Washington but it was formed out of state, then you’ll need to submit a Certificate of Authority (corporations) or a Certificate of Registration (LLC), as well as a certificate of good standing or equivalent from your home state to the Washington Secretary of State.
Register with the Department of Revenue
If you’re a business that will make more than $12,000 a year or if you have employees, then you must complete a business registration with the Department of Revenue, Employment Security Department, and the Department of Labor and Industries. If you want a bond in Washington, then this is a vital step.
Get EIN Number
The next step to getting a contractor license and bond in Washington involves getting an EIN number. Once you fill out a license application, the EIN number will be created for you. If you have employees, then you also must get the appropriate federal tax ID from the IRS.
The next step in the contractors licensing process is to get bonded. If you’re a general contractor, then the bond cost will be $12,000. For a specialty contractor, the bond Washington cost will be $6,000. A Washington contractor license bond can also be provided by an insurance agent. Additionally, the Department of Labor & Industries also requires that the contractor submits an original of the bond, so be sure to keep copies for your records.
Proof of Insurance
After the bond is obtained for the appropriate bond amount, then proof of liability insurance and other insurance needs to be handled. Washington state requires that contractors obtain and submit a certificate that proves the contractor has a $50,000 property damage insurance policy, including $200,0000 public liability insurance coverage.
After the vital steps of getting a bond and providing proof of insurance, you’ll then want to submit the application with your first name, last name, and other vital info. You’ll then want to download the Application for Construction Contractor Registration from the L&I website, then fill it out carefully. You’ll then have the choice of mailing in your application or taking it into your local Department of Labor and Industries office. However, one important factor to remember is that the application must be signed in front of a notary public and they must also sign it and stamp it.
What happens if I have bad credit?
It is still very possible to obtain a contractors business license in Washington with bad credit; there will just be a higher premium for those contractors. For applicants that have a credit score below 650, they will typically have to pay between 3% to 10% to get bonded.
How do I renew or cancel my contractors license bond?
Renewals for bonds are handled on an annual basis. If you wish to cancel your bond, then you’ll need to notify the surety by submitting a 45-day written notice. Once the cancellation is made, you forfeit your licensing rights.
What happens in case of a claim?
Once a claim is made, the contractor will be the first one to be notified; this gives them the opportunity to correct the issue. If the contractor fails to handle a dispute properly, then the claim will be made, and the surety will then pay for the damages.
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