Who this applies to
A general contractor license from the North Carolina Licensing Board for General Contractors (NCLBGC) is required for projects of $40,000 or more [3]. The license does not carry a bond as a matter of course. It carries a financial test, and the bond is the alternative to passing it: an applicant or renewing licensee who chooses not to demonstrate the required working capital, or for a limited license the net worth option, can file a surety bond instead [1].
Both the test and the bond scale with the license limitation, which is limited, intermediate or unlimited [2]:
- Limited: $17,000 in working capital or $80,000 in net worth [1], or else a $175,000 bond [1].
- Intermediate: $75,000 in working capital [1], or else a $500,000 bond [1].
- Unlimited: $150,000 in working capital [1], or else a $1,000,000 bond [1].
What the rule says
Rule 21 NCAC 12A .0204(e) names the three bond amounts and requires the applicant to maintain the bond at the amount for its license [1]. It names the State of North Carolina as obligee, for the benefit of anyone damaged by the licensee's breach of a construction contract, by breach of a contract for labor, materials or professional services, or by an unlawful act or omission in performing a construction contract. The rule adds that this bond comes on top of any other bond required by law or by contract and does not replace one [1].
How to comply
Taking the bond route brings conditions with it. The bond has to be continuous, and the surety must be rated Superior (A++/A+) or Excellent (A/A-) by A.M. Best [1]. It stays in place for as long as the license is held, or until the licensee shows the required working capital. If the surety cancels, the licensee has 30 days to re-establish financial responsibility, and the license is suspended if that does not happen [1].
Before choosing between capital, net worth and a bond, compare the figures for the license limitation sought with the Board's classifications page and the rule text, both listed under Sources. For a particular application, the Board at nclbgc.org is the authority.
What changed recently
The rule was amended effective September 1, 2019 [1]. It was then recodified from 21 NCAC 12 .0204 to its present number, 21 NCAC 12A .0204, effective January 2, 2020 [1].
Related
For cost, see the contractor license bond cost calculator; for the national picture, all states' bond requirements.