I am in a trade that requires state certification. Do I Need a Bond?
Updated on 11/22/2010
If the state requires you get a bond, then get a bond. However, normally, a small business insurance will cover most of what the bond covers. So, if you are starting a small business and you are worried about getting a bond, get business insurance but you really don't need even insurance. On the other hand, if you have the extra money, go ahead and get small business insurance.
A bond is like a guarantee that a bond company will pay for any obligations you don't fulfill under a contract. So for example, if you are a construction contractor and you promised to build a hamburger stand by July fourth and you don't make it by that date, the hamburger stand owner can sue you for lost profits for the days that should have been selling hamburgers but could not because you failed to finish the project as promised. So the bond company will pay the lost profits if any. Here is another example: You have a cleaning company and you hire a few workers. You want to make sure you will not be liable if they steal any items from your customers' houses so you get a bond to pay for items stolen. By the way, the worker must have been convicted and sentenced before the bond company will reimburse your customer.
A surety bond is an insurance provided by bond companies that are normally specialize in issuing bond insurance. A surety bond is a license and permit bond for your type of trade. Some trades MUST be bonded because it is required by law. For example, you enter into a contract to do a work with Joe Doe. The bond guarrantees that you will perform as agreed and if you don't, Joe Doe will get compensated for damages or monies paid to you.
However, some states and specific trades actually require that you are bonded. For example, a construction contractor or a notary are required by the state to have a bond before they are issued a trade license. ( A business license is different than a trade or professional license in that a business license is required by all businesses even if they have a professional license.
So, it depends whether your type of occupation or business needs one. Most such trades ( see below if you are on the list that need a bond) do need a bond. The surety bond is required for most Licenses & Permit that is why is called a License and Permit Bond. It is kind part of your license but it is issued by a bond company as opposed to the business license that you can get here online.
What kind of bonds are there?
First
This includes bid or bidders bonds, labor & materials, payment, performance, maintenance, service contracts, site improvements, subdivision, local compliance, etc -- includes both contractor and non-contractor contracts. Use the License and Permit bond application for state Contractor License bonds.
There Two Types: A Single Transaction Bond or A Continuous Bond.
So who can get a bond?
Here is a list of professions or businesses that can get a bond.
Adjuster - Private Adjuster - Public Agricultural Dealer Alcoholic Tax (Wholesale, Retail, Mixed) Alcoholic Liquor Wholesaler | Manufacturer | Brewer Annual Oversize Permit ARC OR Sellers of Travel Auctioneer Auto Insurance Fund Producer Automotive Dismantlers and Parts Recycler Bond Auto Wreckers Bail Bond Agent Beer and or Wine Tax Bid Bond Blue Sky Body Shop
ERISA Farm Labor Fertilizer Dealer Finance Lender Financial Obligations Fish Dealer Fire Extinguisher System Firearms Dealer First Mortgage Broker Fuel Tax Fundraiser Funeral or Burial Fund Funeral Seller Fur Dealer Gambling Manager Game of Chance Gaming Establishment Gas Fitter Grain Dealer Grazing & Farming Lease Gross Production Tax Guaranteed Toll Account Hauling - Credit | Performance HVAC Compliance Hearing Aid Fitter Heating & Air Conditioning Contractor Highway Right of Way Highway & Street Permit Home Health Care Fidelity Bond Home Improvement Contractor Hunting & Fishing Guide Immigration Consultant Bond Information Purchaser Inspection Station Insurance - Advisor | Agent | Broker | Consultant | Producer Insurance - Adjuster Private Insurance - Adjuster Public Investment Advisor Janitorial | Business Service Bond Laundromat Legal Document Assistant License Agent Limited Restaurant License Liquor by the Drink Liquor License Loan Broker Local Compliance Long Term Care Facility Lost Instrument - Individual Lost Instrument - Company Lottery Agent Manufactured Home Dealers (warranty & no warranty) Manufactured Home Installer Manufactured Home Service Company Mileage Tax Milk Dealer Mobile Home Consumer Deposit Mobile Home Dealer Mobile Home Installer Mortgage Bank | Broker Motorcycle Dealer Motor Vehicle Wholesale Auction Motor Vehicle Dealer *Franchise and Used Vehicles Motor Vehicle Dealer Wholesale Motor Vehicle Driving School Motor Vehicle Information Requestor Motor Vehicle Recycle Motor Vehicle Salesperson App for Notary Bonds Notary (with or without E&O) Nursing Home | Patient Trust Nurses Registry Official Testing Station One Day Liquor Outdoor Advertisor Outfitter or Guide Oversized | Overweight Paid Solicitor Partial Service License Branch Pawnbroker Payroll Processor Payment Bond Performance Bond Pest Control Pesticide Applicator Plumber Precious Metal & Gem Dealer Premium Finance Company Private Detective Private Security Private Schools Process Server Produce Dealer Professional Fundraisers - Solicitors Professional Photocopier Public License Tag Agent Real Estate Brokers Registration Service Remittance Agent Rental Company Tax Residential Mortgage Lender | Service Retail Liquor | Transport Retailer On-Premise Liquor Sales Finance Company Sales Tax Salvage Yard Salvor School Bus Driver Secondhand Dealer Security System Installer Sewage Treatment Installer Hauler Service Small Loan Lender Snowmobile or Motorcycle Dealer Solid Waste Collector Sprinkler System Street Obstruction Subcontractor Sales and Use Tax Subsurface Sewage Disposal Installer Subterranean Termite Eradication Surplus Lines Broker Talent Agent Tax Preparer Technology System Contractor Third Party Administrator Title Insurance Producer Title Insurance Settlement Agent Title Service Company Tobacco Tax Tobacco Weighman Tow Truck Operator Transient Vendor Trade School Traffic School Bond Trustee or Mortgagee for Foreclosure Unemployment Compensation Unlawful Detainer Assistant Vehicle Registration Service Vehicle Verifier Vessel Dealer Video Lottery Warehouse Waste Tire Hauler Water Well Driller Weighmaster Well Driller Wholesaler Pharmacy Yacht & Ship Broker MISCELLANEOUS | FEDERAL BONDS App for Miscellaneous Bonds Contract Postal Unit Packers and Stockyards - Agents | Dealer Packers and Stockyards - Packers Toll Road and Turnpike Authority Union Benefits Guarantee Union Wage & Benefits Guarantee Utility Deposit Wine
COURT BONDS App for Court Bond Appeal | Supersedeas Attachment | Sequestration Bankruptcy - 7 - 11 Claim & Delivery Cost Bond Garnishment - Defendant Garnishment - Plaintiff Immigration - (ICE) Indemnity to Sheriff (after judgment) Indemnity to Sheriff (other writs of process) Injunction Mechanics Lien Preliminary Injunction Bond Plaintiff | Defendant Bonds Replevin Stop Notice Temporary Restraining Order Writ of Possession BANKRUPTCY BONDS Chapter 7 Chapter 11 EQUITY COURT BONDS Masters, Referees, Trustees, Commissioners to sell and distribute assets Receivers, Trustees, Others to manage property or a business Receivers, Trustees, Others to liquidate assets and distribute to creditors PROBATE BONDS Administrator, Conservator, Executor, Guardian, Limited Guardian, Trustee (Under will or trust) Administrator, Conservator, Executor, Guardian, Limited Guardian, Trustee (Under will or trust) Administrator, Conservator, Executor, Guardian, Limited Guardian, Trustee (Under will or trust) Administrator, Conservator, Executor, Guardian, Limited Guardian, Trustee (Under will or trust) PUBLIC OFFICIAL BONDS App for Public Official County Commissioner Hunting & Fish License Vendors Notary Public Public Administrators Sheriffs and all Subordinates Tax Collector
Bond Of Seller (Sales Tax) Burglar Alarm | Fire Alarm Business Partner Automation Business Services Car Wash Cemetery Certificate of Title Certified Public Weigher Check Casher (Pay Day Loans) Citrus Fruit Dealer Citrus Fruit Excise Tax | Inspection Coin Operated Amusement Machine Operator Collection Agency Community Care Contract Bonds Contractor Contractor (pool & roof) Contractor - Non-Resident Customs Bond Day or Temp Labor Defective Title Designated Agency | Designated Agent Detective Agency Dishonesty - Business Service Distilled Spirits, Wine, & Malt Beverage Tax Driver Education Program Durable Medical Equipment (DMEPOS) Educational Institution Employment Agency Employment Leasing Company
Bond Costs: The average is 1% - 5 % of the penalty value of the bond. Here is what is considered are the type of bond, your credit standing in some cases, the current condition of the industry you are seeking bonding in, and the risk history of the bond. Contract Bonds - .5% - 4% and higher
Court Bonds - 1% - 4% and higher Immigration Bonds - 12% - 15% + Full collateral License & Permit Bonds - 1% - 5% average and 5% - 25%
Probate Bonds - The higher the bond the lower the rate. .25% - 5% With the exception of a few Notary and Process Server)most bonds have a $100 to 150 minimum cost.