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Arkansas Contractor License Bond

Arkansas Contractor License Bonds - A construction job site in the background. A large state of Arkansas in the middle with the U.S. Flag in the state. Words Arkansas Contractor License Bond below.

Many commercial contractors in Arkansas need an Arkansas contractor license bond. The state has different requirements for these Arkansas Contractor License Bonds depending on what type of work the contractor performs and what size the projects are.

Classifications of Arkansas Contractors

Arkansas separates contractors into four different classifications for licensing purposes. These are:

  • Commercial License
  • Residential Builders License
  • Residential Remodelers License
  • Home Improvement Specialty License

Generally, only Commercial Licenses require an Arkansas Contractor License Bond and this article will focus on those license classifications.

Arkansas Contractor Commercial License

Commercial Construction in Arkansas is defined as any construction that is not on a single-family residence. If a contractor is performing work on a project in the amount of $50,000 or more in the state of Arkansas, they need a commercial contractors license. A project is considered all work under a single contract, but a contract cannot be split up to avoid licensing requirements. This $50,000 threshold includes both labor and material. Under the Commercial License, there is also two categories. These include a Restricted Commercial License and an Unrestricted Commercial License.

Restricted Commercial License:

A restricted Commercial License allows a contractor to work on a project in the amount of $750,000 or less. This includes labor and material. Once again, this is a per project amount and contractor cannot break the project down to avoid licensing requirements. To obtain this type of license, a contractor must only provide a CPA compilation with a balance sheet prepared in accordance with Generally Accepted Accounting Principles (GAAP) or on an income tax basis. The statement cannot be prepared internally, and it must be less than 1 year old.

Unrestricted Commercial License:

An Unrestricted Commercial Contractor License allows the contractor to perform projects of any size. In contrast to the restricted license, a contractor must submit a CPA Review or Audit to qualify for this license. Again, the balance sheet must be prepared in accordance with GAAP or on an income tax basis. The statement must also be less than one year old.

Both Restricted and Unrestricted Commercial Licenses require an application, references, filing fee, entity filing with the Secretary of State, and an Arkansas Contractors License Bond.

Arkansas Contractors License Bonds - Little Rock Arkansas in the background with a pink, purple and blue tint. Two boxes with the definition of Restricted and Unrestricted Arkansas Contractor Licenses in the middle.

Amount of the Arkansas Contractor License Bond

The state requires that both Restricted and Unrestricted Commercial Contractors post a surety bond in the amount of $10,000. You can see a copy of the required Contractor License Bond below.

Arkansas Contractors License Bond Form with a Blue Border

 

What Does an Arkansas Contractor License Bond Guarantee?

Per 17-25-404 (3) of the Arkansas State Licensing Law for Contractors, the contractor license bond guarantees that the contractor complies with tax laws, ordinances, rules and regulations of any city, county, school district, state agency, or other political subdivision of the state, the Workforces Services Law, the Workers’ Compensation Law and the provisions of the Arkansas State Licensing Law for Contractors.

A contractor who does not comply with any of these laws or ordinances, could have a claim filed against their license bond and could have their license suspended or revoked.

License Bond Term

Arkansas Contractor License Bonds must be in place continuously while the contractor is licensed and performing work. The surety bond company writing the license bond may cancel the surety bond. However, they must give the Arkansas Contractors Licensing Board 60 days notice prior to cancelling the license bond. If this happens, the contractor must either get a new surety bond company to replace the license bond or get the existing surety bond company to reinstate the license bond before the expiration date.

Other License Bond Requirements

Unlike some states, Arkansas requires an original copy of the contractor license bond to be filed. That means an electronic copy is not accepted. A bond must be signed by the surety bond company or broker and the Principal contractor on the license bond before submitting to the License Board. This must also include a surety bond broker’s power of attorney, and a copy of the broker’s Arkansas insurance license. These documents should be sent to Contractors Licensing Board or CLB, 4100 Richards Road, North Little Rock, AR, 72117. Failing to submit any of these items could cause the license bond to be rejected.

Cost of Arkansas Contractor License Bonds

The $10,000 Commercial Contractor License Bond is relatively inexpensive for most contractors. Prices start out at around $75 per year. Surety bond companies also give prepaid discounts for contractors who purchase multiple years in advance. For example, we work with one surety bond company who will write a three-year bond for $150 for some contractors.

How to Get an Arkansas Contractor License Bond

Getting a contractor license bond is Arkansas is very easy. These license bonds are written freely with no real underwriting required. Most of our surety bond companies do not even require us to run credit. We simply need the contractor’s name, address, entity type and certification that they do not have any outstanding surety bond claims. These contractor license bonds can then be issued in a matter of minutes.

Can You Get an Arkansas Contractors License Bond with Bad Credit?

In general, the answer is yes. Although a credit check is not required with most surety bond companies for these license bonds, you may be asked if you have had previous surety bond claims, lawsuits, or bankruptcies. Not to worry, however. We can likely still get approval for these license bonds if you have had some past credit issue.

License Bond Indemnity

Arkansas Contractors License Bonds required the contractor to indemnify the surety bond company to get the license bond. That means that if a valid claim is filed and paid out under the license bond, the surety bond company will seek reimbursement for any and all costs that they incur. These conditions are outlined in General Indemnity Agreement or as part of the application. Contractors should review these terms carefully. Contractors can read more about indemnity here.

Verify the License Bond

Contractor should always verify to make sure that the surety bond company issuing the license bond is acceptable and valid. Unfortunately, there are fraudulent bond companies out there. At the very least, your surety bond company should be rated “A-“ or better by an independent rating service such as A.M. Best. You can read more about verifying a bond here.

Other Surety Bonds May Be Needed

Arkansas Contractor License Bonds are needed to get and maintain a commercial contractors license in the state. However, additional surety bonds may be required. Some cities and counties in Arkansas have their own license bond requirements and those would be needed in addition to the state licensing bond. Also, contractors involved in commercial work frequently need Construction Surety Bonds such as bid bonds, performance bonds, payment bonds and maintenance bonds. These surety bonds are separate from a Contractors License Bond and, often require additional information. You can read more about underwriting these types of construction bonds here.

Arkansas contractors license bonds are necessary for most commercial contractors. They are inexpensive and easy to obtain so there is no reason to go without one. Contact MG Surety Bonds today and we can answer any questions that you may have. You may also visit our Frequently Asked Questions page.