When you break ground on a new project, you want to ensure that you produce a finished product that amazes the owner and inspires them to continue utilizing your services for future building endeavors. Depending on where this owner’s business operates, additional contracts could take your contracting services to jurisdictions you’ve never had the opportunity to work in. Although expanding into new areas will inevitably lead to some complications, especially regarding licensing, you don’t want to turn away the opportunity to expand your business, grow your reputation, and maximize profitability.
Before you dive into a project in a new place, do your homework and consult a Memphis construction attorney to ensure that you are working in compliance with any and all relevant laws and regulations. In this two-part series, our Memphis construction attorneys will discuss what you should do before working or bidding in a new state.
Understand the Various Licensing Authorities
You can’t just show up in a new state and break ground without first learning about the necessary licenses, paperwork, and agreements needed to legally perform this work. There may be exams involved with information specific to the state that you aren’t prepared for without prior counsel, and the licensing process can take as little as one month or as long as six months. When a client requests your services for a project in a new state, it’s vital to understand the various licensing authorities that ultimately decide whether or not you are legally permitted to work.
Contractor licensing protocols vary from state to state. Typically, licenses are issued by a combination of state and local governments. According to Construction Business Owner:
- In 34 states, a general contractor license is requisite for breaking ground.
- Another 3 states issue licenses at the county level.
- Additionally, 14 other states (including Washington D.C.) issue contractor licenses on the county and city levels.
- If you plan to extend your services to include specialty trades like plumbing or electrical, the licensing requirements will be handled independently, usually through different boards.
Ensure You Obtain the Correct License
Generally, there’s no one-size-fits-all solution to your licensing needs. Depending on the scope and value of the project you intend to take on, you may need a specific class of license to proceed.
For example, according to the Tennessee Department of Commerce and Insurance, “A Contractor’s license is required prior to contracting (bidding, offering to engage, or negotiating a price) for projects $25,000 or more.”
On the other hand, if you were to take on a project in Virginia, you would have to procure a license from the Virginia Board of Contractors for one of three levels:
- Class A: Single contracts valued at $70,000 or more, or $500,000 in a single year.
- Class B: Single contracts valued at $7,500 to $69,999, or $150,000 to $499,999 in a single year.
- Class C: Single contracts valued at $1,000 to $7,499, or less than $150,000 in a single year.
You must also determine which type of business entity best fits your company in the new state, which a Memphis construction attorney can assist you with. You will read about this and more in part two.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.