Contractors in Arizona, as in many other states, need to get licensed if they are conducting work worth more than $1,000. The State of Arizona differentiates between residential and commercial contractors. That’s why there are 238 license classifications, split among various subgroups.
Note that all rules governing contractor licensing in Arizona are bound to change as of July 1, 2014. You can see all the previewed modifications here. The process and requirements will be altered with the aim of making licensing clearer and more straightforward. These include a simplification of the classification system, as well as an increase in the surety bond and insurance amounts.
If you want to get licensed before July 1, you will apply under the current licensing system. The process involves various administrative steps, so it’s a good idea to get well acquainted with them in advance. Read on for a great digest and tips on how to make your licensing smoother and easier.
The Arizona contractor’s license requirements
To apply for a contractor’s license in Arizona, you first need to register your business with the Arizona Secretary of State. Once you are a business entity, you can begin the licensing process with the appropriate papers proving your registration.
Besides filling in the application form, there are a number of requirements you need to meet in order to get your license. First of all, you need to pass an exam in Business Management and in the specific trade for which you are getting licensed. You can prepare for the exam by studying on your own or by taking a prep course. The course fee is $56. You need to attach the exam results to your application form.
After you have passed the exam, you need to get a Transaction Privilege Tax Number from the Arizona Department of Revenue and a Tax Identification Number (TIN) from the Internal Revenue Service (IRS).
You will also need to obtain an appropriate surety bond depending on your type of license classification, as well as insurance, including workers compensation.
Along with submitting your application and the full set of documents, you need to pay the appropriate licensing fees. They vary based on the type of classification you need:
- Commercial classifications: $890 for A, B-1, B-2 & BE and $645 for L (without the Recovery Fund Fee);
- Residential classifications: $895 for B, B-3, B-4, B-4R, B-5, B-6, B-10 & B-5R and $770 for C (including the Recovery Fund Fee);
- Dual classifications: $1,555 for KA, KB, KE & KO and $1,265 for K (including the Recovery Fund Fee).
The contractor license bond
Just as in other states, one of the licensing requirements in Arizona is obtaining a contractor license bond. The type of classification for your license determines the bond amount. The amounts are also bound to increase as of July 1, 2014, when the new rules come into action. But if you’re a contractor, you should not worry. You’ll still only need to pay a percentage of the bonding amount in the form of an annual premium.
The current bonding amounts are as follows:
- Commercial classifications: between $5,000 and $90,000 for each A, B-1, B-2 & BE and between $2,500 and $45,000 for each L specialty;
- Residential classifications: between $5,000 and $15,000 for each B, B-3, B-4, B-4R, B-5, B-6, B-10 & B-5R and between $1,000 and $7,500 for each C specialty;
- Dual classifications: between $10,000 and$105,000 for each KA, KB, KE & KO and between $3,500 and $52,500 for each K specialty.
You might need additional bonds if you are planning to work on public projects in Arizona. If you are bidding, you will need a bid bond, a performance bond and a payment bond. These are necessary at different stages of the bidding process and actual construction. Moreover, these are contract bonds, which means they must be obtained separately for each new project.
To gain a clearer understanding of surety bonds, note that they serve as insurance for your clients and not for your contractor business. Their aim is to provide the general public with a safety net when they’re using your services. The bonds guarantee that your company will follow the rules and regulations applying to your business, thus safeguarding the interests of your clients. Bonds are an indispensable requirement to get licensed in Arizona. You can apply online for your Arizona contractor license bond and get an instant quote.
Ready to start your business?
Having read through this overview, you can safely start your licensing application today. Don’t forget to take into account the changes that will apply as of July 1st. If you still have any questions regarding the bonding, feel free to contact us.