A Step-by-Step Guide to Becoming a Licensed Contractor in Texas
Before you can operate as a contractor in Texas, for most professions you need to get a contractor’s license from the Texas Department of Licensing and Regulation. The licensing process consists of multiple steps that you have to follow and usually means you have to obtain a contractor license bond in Texas.
These requirements are needed because the state aims to protect its citizens by guaranteeing that contractors are qualified and safe to work with. Thus, becoming a licensed contractor gives your customers a strong signal that you are fit for the job and are following the applicable rules in your industry.
To help you out in the licensing process, we’ve prepared this step-by-step guide to becoming a licensed contractor in Texas, so your start is smoother and easier.
Check whether you need a Texas contractor’s license
Your first step is to find out if you’re one of the contractors who requires a license at all. Not all profiles of contractors are required by state law to be licensed. House builders and handymen carpenters don’t need to get licensed, for example.
You can find full information on exactly which types of contractors require a state license on the Texas Department of Licensing and Regulation’s website.
Some of the common types of contractors who need licenses include:
- HVAC contractors
- Well drilling specialists
- Pump installation specialists
- Refrigeration and fire systems specialists
- Landscapers and interior designers
The licensing requirement generally applies to both contractors and subcontractors. The same rules also hold for the vast majority of contractor and subcontractor work commissioned by the Texas Department of Transportation.
Don’t forget that, in addition to your Texas state license, your county or city may have additional licensing requirements for other kinds of contractors. You need to check with your local authorities to make sure you’re in compliance.
Even if you don’t need a Texas contractor’s license, the state may require you to register as a contractor, so be sure to also to get acquainted with registration requirements at both state and local levels. For contractors in the residential remodelling and building industries, a very good source of information and assistance is your local chapter of the National Association of the Remodelling Industry (NARI).
Fulfill all conditions for your contractor’s license
If your contractor license research confirms that you do need to be licensed in Texas, then what’s the next step?
There will, of course, be variations from license to license and you will have to check the specifics with the TDLR, or at local government level in the case of a local licensing requirement.
However, in the majority of cases you will need to demonstrate the following:
- A period of relevant work experience, two years is the most common case;
- Letters of reference from contractors you have worked with or for who hold a license issued by the State of Texas (your referees will often have to have held their own licences for at least two years);
- A banking reference and references from customers you have previously serviced;
- Often you also need relevant professional qualifications gained from an accredited educational institution, including a state exam.
Ordinarily you will apply for your license via the TDLR. Once they have approved your general application, relevant work experience and references, they will notify the designated exam provider and you will be informed on how to register to sit the exam.
You will usually be able to take the exam several times within a certain period of time until you pass. This means you have to pay your exam fee, usually between $100 and $200, for each attempt, so the more prepared you are the first time, the better.
Obtain the right insurance coverage
Besides meeting all requirements described in the previous section, all contractors and subcontractors working within the State of Texas are also obliged to hold valid insurance covering their activities.
This includes Workers’ Compensation and Employer’s’ Liability Insurance, Commercial General Liability Insurance and Professional Liability Insurance. For specific contracts, other forms of insurance may potentially be required.
Get your Texas contractor license bond
The last step before you can start your business as a licensed contractor is to obtain a Texas contractor license bond.
In general, contractors are required to get a license as this ensures that they have been officially verified and can carry out their chosen area of work in accordance with the rules and regulations governing the execution of that professional skill. The surety bond ensures that not only can you, as a contractor, carry out your work according to the stipulated rules, but that you practically do so.
In this respect, contractor license bonds differ from and should not be confused with payment and performance bonds. The former ensure that work is carried out in accordance with obligations of the contractor’s license, whereas the latter ensure a contract has been fulfilled according to its specifications.
The price of a Texas contractor license bond will to a large extent depend on your personal credit rating and overall finances. If you have a good credit score, the price will typically fall within the range of 1%-3% of the bond amount.
For contractors with lower credit score, the surety bond cost is likely to be somewhere between 5% and 15%.
Getting acquainted with the steps of becoming a licensed contractor in Texas can help you have an easier licensing and bonding process. While it’s a fairly complicated one, with sufficient information, you’re bound to launch your business successfully.
If you have any questions regarding your Texas contractor license bond, don’t hesitate to contact us online or call 877.514.5146.