If you want to get into the business of building homes, you’ve probably looked at what’s required. From tools to specific skills, you’ll need to amass quite a bit to prep yourself for a career as a general contractor. And in most states, that includes getting properly licensed for your contracting work.
You might think this is a step you can skip, at least for a while, but doing so can actually be illegal. Most states set a project threshold, which is usually somewhere between $500 and $10,000 for residential builds. To get an idea of when licensing is required, you can check out this guide.
If your project is going to exceed the set limit, state law requires you to be properly licensed. In addition to the legal necessity to get a general contractor license from your state, there are a few other perks to getting properly licensed. Let’s take a look.
First and foremost, getting your license helps you stay compliant with state law. And that can help you avoid some pretty steep fines and penalties. For starters, you could have to pay amounts in the thousands of dollars if you’re caught working without a license. Some states even levy a fine for each day you’re unlicensed, so the cost can add up quickly.
Beyond that, there’s your criminal record to consider. Unlicensed work could land you with a misdemeanor conviction. You could even face months of jail time.
Another state-imposed penalty comes in the form of slashing protections for you. If you’re unlicensed but you do work that requires a license and your client doesn’t pay up, your state might not offer any recourse for you.
Even if your state never catches you, operating without a license could limit your business growth opportunities. Most states host a contractor license lookup tool on their website. The goal there is to allow consumers to vet potential contractors and ensure they’re legitimate before hiring them.
If you’re not properly licensed, you won’t show up in that registry. And that could mean losing out on a bid even if you had the best pricing and timeline.
A contractor license is like a badge of honor, giving you an easily understood way to show your potential clients that you know your stuff.
As a GC, you’re going to be hiring subcontractors to work on your projects. If you’re not licensed, you don’t have a leg to stand on to enforce their own licensure.
That could leave you facing serious issues. If you hire an unlicensed electrician and their work results in, say, a fire, the liability could fall on you. Ultimately, hiring unlicensed subs is a risk you probably want to limit. But you might have a hard time enforcing a licensing requirement if you’re not meeting it yourself.
Long story short, if your build is going to exceed your state’s project threshold — which is usually pretty low — yes, you’re going to need your general contractor license. Fortunately, putting that license in place can help you legitimize your business, attract new clients, and find high-quality subcontractors.