Licensing advice for construction and home service contractors.

1. Do You Need a Contractor's License?
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2. Who Should Be Licensed
The rules for licensing
contractors varies from state
to state, but most states
require a license for home-improvement
trades such as
construction, HVAC,
plumbing and electrical work.
"HVAC at the new library" by Michael Casey is licensed under CC BY 2.0 - https://www.flickr.com/photos/michaelcasey/73595793

3. Know Your Local Laws
Not all states strictly enforce licensing laws, but
many do.
Cities and counties may also require licenses in
addition to state licenses.

4. Licensing Costs
The fees to obtain a license vary by state, but aren’t typically cost-prohibitive.
As an example, below are the costs for a general contractors license in Florida (as of 2014)
● Application fee: $200-400
● Exam fees:
○ $135 paid to state licensing board
○ $80 paid to state dept. of business and professional regulation
In at least 39 states, licensed contractors must also carry workers' compensation, liability, and
property damage insurance.

5. A Licensed Contractor Is Protected Against Workplace Injury
A contractor's license requires worker's
compensation insurance.
If your employee falls off a ladder and
breaks a bone, the insurance company
will pay the bill. This keeps many
businesses from going bankrupt.
Street Art - Falling Off The Property Ladder by William Murphy is licensed under CC BY 2.0 - https://www.flickr.com/photos/infomatique/5465865674

6. What If You Are Injured and Not Licensed and Insured?
If a contractor is working in a home and is
injured on the job, the employee could sue
the homeowner for medical bills and lost
wages. This is not good for your business
reputation.
A licensed and insured contractor protects
their clients from these types of risks
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7. Fines and Criminal Charges
Contractors who are caught doing
contracted work without a license will be
fined.
For repeat offenses, the fines are often
increased and the contractor may face
criminal charges.
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com/photos/timpearcelosgatos/3557791151

8. Having a License Makes You Trustworthy
A license shows your
clients that you aren't a
fly-by-night contractor. It
proves that you have
the knowledge and you
know your trade.
"Contractors review plans" by U.S. Army Corps of Engineers is licensed under CC BY 2.0 - https://www.flickr.com/photos/usacehq/5056771149

9. Tax Benefits
Licensed contractors can often
legally write-off business costs
such as gas, tools, trucks, and
office space (home or
commercial space)
"Self Employment Tax Form - Schedule SE" by Philip Taylor is licensed under CC BY 2.0 - http://ptmoney.com/

10. Legal Consequences
If something goes wrong on a job, such as an employee suffering an injury, a lawyer can use your lack of license
against you as evidence of negligence.
According to the Florida Bar, there are least 8 possible consequences that can result from unlicensed contract work:
● Loss of contractor’s contract rights
● Loss of lien and bond rights
● Treble Damages (permits a court to triple the amount of damages awarded to plaintiff)
● Damages for violation of building code
● Administrative sanctions
● Criminal penalties
● Possible action for "disgorgement" (being forced to give up profits)
● Cause of action for "unfair trade practice" (unfair methods of competition)
Unlicensed work performed under a contract is not a defense in court (see Earth Trades, Inc. v. T&G Corporation)

11. Other Drawbacks of Not Being Licensed
In some areas, you might not be able to get a permit for the work you want to do.
You are limited to the number of jobs you're legally allowed to work annually.
Licensed work increases the value of the building. Construction performed without a permit does not
help in the sale of a building.
Without permits and inspections (which is required for licensed contractors), homeowners insurance
may deny a claim if there is a fire or other disaster, whether or not it was the contractors fault, because
the insurance company can't prove that the construction met minimum code. The homeowner will
usually come after the contractor for damages in these cases.

12. Thank You For Reading
For more information about construction law, visit http://www.gouldcooksey.com
The information contained in this presentation is general information and should not be construed as
legal advice to be applied to any specific factual situation.
Sources:
http://www.contractortalk.com/f11/advantages-contractors-license-15138/index2/
http://www.myfloridalicense.com/dbpr/pro/cilb/index.html
http://www.angieslist.com/articles/how-unlicensed-contractors-can-cost-you.htm