License and Permit Bonds (California Contractor License Bond Focus)

License and permit bonds are surety bonds that many cities, counties, and states require before they issue or renew a business license or permit. The bond helps protect the public (and sometimes the government) if the business violates the rules tied to that license.

For California contractors, the most common example is the CSLB contractor license bond required to obtain or keep an active contractor license. Freedom helps contractors and other licensed businesses request license and permit bonds.

Who needs a license bond

You need one when a regulator says so. Examples:

• California Contractors State License Board (CSLB) — active contractor licenses require a contractor’s bond on file
• City or county business licenses and trade permits (plumbing, electrical, towing, scrap metal, and many others — lists vary by city)
• Certain state professional or dealer licenses outside construction

Always match the bond to the exact license name, legal entity name, and license number the agency shows on its records.

California contractor license bond

Per CSLB and California Business and Professions Code §7071.6, an active California contractor license generally requires a contractor’s bond in the amount of $25,000. The bond must be written by an admitted surety and filed on an approved form.

What this bond is for:

• It is filed for the benefit of consumers damaged by certain construction or license-law problems, and for certain unpaid wage claims, as the law provides
• It is not a performance bond for a specific job
• It is not general liability insurance
• Paying a claim on the bond can lead to the surety seeking repayment from you, and CSLB discipline can follow unpaid bond claims

Other California contractor bonding items you may also hear about:

• LLC employee/worker bond: LLC licenses also require a separate $100,000 employee/worker bond under BPC §7071.6.5 (in addition to the $25,000 contractor bond; not required while the license is inactive).
• Bond of qualifying individual: generally $25,000 when the qualifier is not the proprietor, a co-owner of the firm, or a joint licensee (BPC §7071.9). An RMO may be exempt if the person owns at least 10% of the voting stock and certifies; an LLC qualifier may be exempt if the person owns at least 10% of the membership interest and certifies.
• Disciplinary bonds after license discipline (amount set by the Registrar; not less than $25,000 nor greater than 10× the contractor bond, and typically kept on file for at least two years).

What license bonds guarantee

A license or permit bond guarantees that the business will follow the laws and regulations tied to that license. If a covered claim is proven, the surety may pay eligible parties up to the penal sum, then look to the principal for reimbursement.