Avalara : Getting business licenses every contractor needs

Are you getting ready to start your construction business?

One of the most critical first steps is nailing down all the necessary licenses. Without proper contractor credentials for your state or local municipality, you could face fines, lose the ability to operate your business, or suffer other punitive measures. And although some states extend reciprocity for professionals licensed elsewhere, many jurisdictions make license compliance a 'custom build' project.

Contractor license requirements are so diverse from state to state and between local municipalities that it's not really possible to give common parameters, except to say that many states call for a general contractor license at the state level, others leave it up to local municipalities. Some states make licensing contingent upon the job value; some differentiate between residential and commercial; and several states request additional requisites, such as insurance or exams, like Alaska: To build new homes or perform other residential work that exceeds 25% of the structure value, you must first pass an exam for a 16-hour cold-climate course.

Arkansas requires all general contractors to carry a state general contractor license to undertake any job billed over $2,000 - but then they get fancy with five different license subcategories: Commercial License, Restricted Commercial License, Residential Builders License, Residential Remodeler Limited License, and Residential Remodeler Unlimited License. For all these licenses, you must pass a business and law exam and provide proof of bond and worker's compensation insurance along with a financial statement.

Then we have Colorado, which doesn't mandate state contractor licenses - but most of its local municipalities do. Many local governments require active insurance before issuing a license. Montana contractors have it somewhat easier in that they only need to register with the Department of Labor and Industry if they have employees.

To obtain any of the four different contractor licenses in Georgia, you'll need a bit of education first: a diploma or transcript in architecture, building construction, engineering, or project management; college-level coursework and work experience equivalent to at least four years of university experience; or at least four years of work experience in construction, with two of those years working for a general contractor.

Meanwhile, in North Carolina, if you want to secure the state general contractor license necessary for projects exceeding $30,000, you must be 18 years old, legally registered to conduct business, pass the National Accredited Building Examination, answer questions about your professional background, and provide proof of collateral to back up those jobs over $30,000.

In Oregon, contractors must hold a state license, and the requirements to do so are some of the strictest in the nation - and a bit too long to list here.

The above sampling illustrates just how varied contractor license regulations can be. What licenses you need and what you must do to obtain them are wholly unique to your state. You can begin your research with your Department of Labor and State Contractors Board, as these are the two most common institutions that issue contractor licenses. But don't forget to check with your local governments to be sure you're covered all around.

If you need additional help with your research, check out some of the leading tax compliance solutions that help business owners discover business license requirements, such as Avalara.