South Carolina requires that contractors be licensed and that certain contractors provide South Carolina Contractor License Bonds to protect the public. Learn more about these Contractor License Bonds including how to obtain them.
The South Carolina Contractors’ Licensing Board (SCCLB) governs the licensing for contractors in the State of South Carolina under Title 40 Chapter 11 of South Carolina State Law. The law requires that most General Contractor and Mechanical contractors performing work in the state be licensed. Section 40-11-30 says,
“No entity or individual may practice as a contractor by performing or offering to perform contracting work for which the total cost of construction is greater than five thousand dollars for general contracting or greater than five thousand dollars for mechanical contracting without a license issued in accordance with this chapter.”
Therefore, all General Contractors and Mechanical Contractors performing more than $5,000 worth of work must be licensed.
As part of the South Carolina contractor licensing process, contractors must prove financial responsibility. They can either provide an approved financial statement or provide a South Carolina Contractor License Bond. The requirements for financial responsibility are based on the type of license and size of work being done. Contractors for each group must meet certain net worth (Total Assets - Total Liabilities) requirements or working capital (Total Current Assets - Total Current Liabilities) requirements if they want to provide a financial statement. They do not have to meet both. Contractors can also post a South Carolina Contractor License Bond in Lieu of Financial Statement. The requirement for each group is below:
South Carolina General Contractors are divided into 5 categories with a different surety bond or financial statement requirement for each category.
A Group 1 General Contractor may instead choose to post a South Carolina Surety Bond in Lieu of Financial Statement in the amount of $20,000.
A Group 2 General Contractor may instead choose to post a South Carolina Surety Bond in Lieu of Financial Statement in the amount of $60,000.
A Group 3 General Contractor may instead choose to post a South Carolina Surety Bond in Lieu of Financial Statement in the amount of $150,000.
A Group 4 General Contractor may instead choose to post a South Carolina Surety Bond in Lieu of Financial Statement in the amount of $250,000.
A Group 1 General Contractor may instead choose to post a South Carolina Surety Bond in Lieu of Financial Statement in the amount of $350,000.
South Carolina Mechanical Contractors are also divided into 5 categories with the surety bond or financial statement requirements different for each.
A Group 1 Mechanical Contractor may instead choose to post a South Carolina Surety Bond in Lieu of Financial Statement in the amount of $7,000.
A Group 2 Mechanical Contractor may instead choose to post a South Carolina Surety Bond in Lieu of Financial Statement in the amount of $15,000.
A Group 3 Mechanical Contractor may instead choose to post a South Carolina Surety Bond in Lieu of Financial Statement in the amount of $30,000.
A Group 4 Mechanical Contractor may instead choose to post a South Carolina Surety Bond in Lieu of Financial Statement in the amount of $60,000.
A Group 5 Mechanical Contractor may instead choose to post a South Carolina Surety Bond in Lieu of Financial Statement in the amount of $300,000.
A South Carolina Contractor License Bonds guarantees that the licensed contractor will follow the laws of South Carolina 40-11-262 and will not engage in an act or omission constituting a breach of construction contract or a contract for the furnishing of labor, materials, or professional services for construction undertaken by the principal.
Additionally, it guarantees that the licensed contractor will not commit any unlawful act or omission in performing construction.
If the South Carolina contractor violates these terms, a claim can be made against the contractor license bond. The surety bond company will investigate the claim and have to pay out if the claim is valid.
Generally, yes. Even contractors with bad credit or bankruptcies can obtain South Carolina Contractor License Bonds. The contractor may be asked to provide additional information or even pay a higher rate. However, these bonds can still be easily obtained for most contractors.
South Carolina Contractor License Bonds are easy to obtain and can be purchased online in minutes. For bond amounts less than $15,000, these bonds are instant issue and do not even require a credit check. Larger bonds can still be purchased online but require a simple credit check of the owner.
These bonds cost 0.5% - 2% of the bond amount for most contractors. Some bond companies will give contractor discounts of up to 30% for purchasing multiple years in advance. Keep in mind that these bonds must be in place continuously and the premium will be due each year that the license bond renews.
South Carolina contractors will need to determine if a license bond is more cost effective than providing financial statements. In some cases, it may be much cheaper to obtain a bond than getting a CPA prepared statement. However, in many cases, a CPA prepared statement is required by other parties such as lenders or Contract Surety Bond underwriters. In these cases, it probably makes more sense to provide the financial statements to the state. Some contractors may not want to provide their financial statements to the Contractor Licensing Board. In these cases, the license bond makes sense.
A South Carolina Contractor License Bond must be continuous in nature. It must be in place as long as the contractor maintains a license in the state. The contractor can renew the bond with a continuation certificate. The surety may also cancel the bond by giving thirty (30) days written notice to the South Carolina Contractors’ License Board. However, the surety is still liable for any claims that took place during the time the bond was active including the thirty-day cancellation period.
Regardless of the number of years a surety bond company has written a South Carolina Contractor Bond, the bond amount is the most the surety bond company will have to pay. This is regardless of the number of claims or the dollar amount of claims.
South Carolina Contractors should understand that these bonds are not insurance. If the surety bond company suffers a loss, they will seek to be reimbursed under the indemnity agreement. Contractors can read more about indemnity here, but losses should be avoided at all costs.
South Carolina contractors may need other surety bonds in addition to a South Carolina Contractor License Bond. Many municipalities may require local license bonds or right of way bonds in addition to the Contractor License Bond. Many of these bonds can also be purchased online at the South Carolina Surety Bond page.
Commercial Contractors may also need Construction Bonds such as Bid Bonds, Performance Bonds, and Payments Bonds. These bonds often require additional information such as financial statements.
You can get a copy of a South Carolina General Contractor or Mechanical Contractor License Bond form by clicking on the images below:
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