Construction License Requirements: What You Need to Know

If you’re starting a construction business, you’ll probably need at least one construction license — or several. But exactly which licenses do you need? Do you get them from your state, county, or city? There are a lot of different license requirements, and they vary a lot.

Understanding these requirements is essential to starting your business in the construction industry as smoothly as possible. In this guide, we’ll cover some of the common licenses for construction companies, from general contractor licenses to zoning permits and much more.

What licenses and permits does a construction company need?

Every construction business will have slightly different requirements for licenses and permits. This happens for two reasons. First, every state — and its subsequent cities and counties — has different requirements for licenses. Next, every construction company and business owner has different specialties, and, in turn, will need different licenses. Some states even base their licensing requirements on the overall contract price for a job, too.

That’s why it’s especially important to do your legwork and get the right licenses for your location.

General Contractor’s License

A general contractor’s license is especially common for construction companies; most states require one. Since a general contractor is usually responsible for construction management, overseeing an entire construction project, and hiring all the professionals needed to finish the job, it’s crucial that the contractor is qualified for the job. That’s why a general contractor license is so often needed.

To apply to be a licensed contractor, you’ll need to reach out to your state’s licensing agency. You’ll probably need to provide proof of your experience, proof of insurance‌, pass a licensing exam, provide proof of your insurance coverage, and more. Check with your state for ‌full requirements; working as an unlicensed contractor can incur serious penalties.

Note: a general contractor’s license is different from a construction permit or building permit. We’ll address that later.

Business License

A general business license (or basic business license) may be required simply for the privilege of conducting business (of any kind). Some states, such as Alaska, require a general business license at the state level. But a majority of states let their cities or counties administer a general business license instead. The costs of these licenses vary greatly, too, and so do their renewal fees.

There’s a decent chance that you’ll need to get a general business license, so be sure to check the requirements for business owners in your area.

Specialty Contractor Licenses

Sometimes called subcontractor licenses, specialty contractor licenses are required for businesses (or individuals) that handle a specialized area of construction. For example, HVAC specialists may need a specialty contractor license; a home builder might need a residential building contractor license; a roofer might need a residential roofer license, and more. The exact licensing requirements vary depending on your state’s regulations, so consult the licensing center that’s responsible for your area’s professional licenses.

Building Permit

In many areas, building permits are required for a lot of construction projects. These permits vary greatly. For example, some cities will require a building permit just to put in a fence, retaining wall, or porch. Other jurisdictions only require a building permit for new structures.

Before you break ground or start any sort of renovation project, be sure to check that you have the proper building permits.

Zoning and Land Use Permits

State and local laws carefully govern how different parcels of land can be used. For example, some land is only zoned for residential use, while others can be used for commercial property or manufacturing. Whenever you start a project, be sure to get any required zoning permits.

Health and Safety Permits

During your construction work, there’s a good chance that you’ll need to get permits relating to health and safety. This can vary from safety for scaffolding to the removal and disposal of hazardous waste like asbestos or other compounds. If any aspect of your work could pose a health risk to your workers or the public, you’ll need to get the appropriate permits in your area.

Environmental Permits

Building can, unfortunately, have a negative effect on the environment. For example, removing too many trees can negatively impact erosion rates, and other projects can risk tainting local water sources.

Applying for and getting one of these permits can help mitigate that risk. That’s because when you get an environmental permit, your state’s Environmental Protection Agency will help you work safely, eliminating or reducing any negative effects on the environment.

Workers’ Compensation Insurance

Technically, workers’ compensation insurance isn’t a permit. But it’s a legal requirement for businesses with employees in nearly all states, so we’re mentioning it here. Keeping an active workers’ comp policy helps protect both you and your employees if someone is injured on the job site. It’s like liability insurance but for your workers’ paychecks.

Workers’ comp requirements come into play under different circumstances depending on what state you’re in. Some states require you to get a policy when you have one employee or five, for instance. Generally, though, since construction imposes a fair level of risk for injury, it’s recommended to get a workers’ comp policy right away.

Sales Tax Permit

If your construction business will be selling qualifying goods or services, then you’ll probably need to get a sales tax permit. This permit allows you to compliantly collect sales taxes and remit them to the state. But like all the licenses we’ve mentioned in this guide, the exact requirements vary depending on your state.

DBA

A DBA (also called a “doing business as” name or trade name) isn’t technically a “business license,” but if you plan to operate under a business name that’s not your legal name, you’ll need one. So it’s somewhat like a permit. A DBA registration can be especially helpful for unincorporated business structures like sole proprietors and partners, but any business type can use one.

Every state has slightly different policies for DBAs, including how much it costs. Be sure to check out your state’s specifics.

This list isn’t exhaustive, especially since construction businesses may be subject to a wide variety of specialty licenses. Be sure to do your due diligence to learn which licenses you need in your location.

Ready to get started? Read more: Starting a General Contracting Business

We can help!

Here at ZenBusiness, we understand that starting and running a compliant construction business can feel overwhelming, but you don’t have to go it alone. Our LLC formation service can help you get started stress-free for $0, and other services like our EIN service can help you handle other tedious paperwork, too. Our business license report can also help you determine all the licenses and permits you’ll need in one convenient place. Let us handle the red tape of paperwork and licensing issues so you can focus on growing your business.