What Is a California LLC Employee/Worker Bond?
If you would like to operate an LLC contracting business in California, you need to get licensed with the Contractors State Licensing Board. One of the main requirements it imposes on LLCs is to provide a California LLC employee/worker bond.
The surety bond aims to protect your employees from non-payment of wages and fringe benefits. In case you fail to provide any due payments, a harmed party can file a claim against your bond to seek reimbursement.
Your California surety bond works like a three-party contract. Your LLC contracting business is the principal that is required to obtain the bond. The Contractors State Licensing Board is the obligee which imposes the bonding criteria. The surety backs your company and provides the bond.
Questions about Contractor License Bonds
Who has to post such a bond?
In case you want to operate your construction business as a limited liability company, you need to get a license from the Contractors State Licensing Board. The requirements were set in 2012 with Senate Bill 392, which allows the Board to issue licenses to LLCs.
Posting an LLC employee/worker bond is one of the main criteria you need to meet when you apply for an LLC Original Contractors License. It is set in the California Business and Professions Code, Section 7071.6.5. The bond guarantees your compliance with the California Code of Civil Procedure Sections 996.310-996.360. The $100,000 LLC employee/worker bond is obtained in addition to the standard $15,000 California contractor license bond.
What is the bond cost?
Contractors in California who want to get licensed as an LLC have to post a $100,000 LLC employee/worker bond. This is the bond amount, but the bond premium is only a fraction of it. If your financial situation is stable, your bond rate will be as low as 1%-2.5%.
|Surety bond name||Surety bond amount||Above 700||Between 650-699||Between 600-649||Below 599|
|California LLC Employee/Worker Bond||$100,000||$750-$1,500||$1,000-$2,500||$2,500-$5,000||$5,000-$10,000|
How is your surety bond cost determined? The most important factors that affect is are personal credit score, business finances, any assets and liquidity you can demonstrate, and your professional experience. You can expect a lower bond premium if your finances are in good shape.
What if I have bad credit?
Lance Surety Bonds runs its Bad Credit Surety Bonds program to help out contractors who are facing low credit scores, tax liens, bankruptcies, or civil judgements.
The bond rates for bad credit applicants are in the range of 5% to 10%. The higher price compensates for the increased bonding risk. With us, however, you still get a top price. We work with numerous A-rated, T-listed surety companies, so we can find the best bonding option for you.
How do I get bonded?
If you have questions or need more information, you can consult our detailed How to Get Bonded page, or just call us at (877) 514-5146. Lance Surety Bonds’ specialists are here to help.
How are bond claims handled?
The purpose of your LLC employee/worker bond is not to protect your business. It is there to safeguard the interests of your employees. In case you fail to pay them any due wages or fringe benefits, they can obtain their salaries and benefits via a bond claim. The maximum compensation that can be sought is the penal sum of your bond, which is $100,000 in this case.
If the claim is proven, you are liable to cover all costs and make all due payments. The surety may step in at first, but you have to reimburse it fully afterwards. This means that bond claims can be a serious financial threat and should be avoided.