In this article we will review the requirements you need to obtain a contractor’s license in the state of Mississippi.
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What Contractor Licenses Are Issued in Mississippi?
The Mississippi State Board of Contractors issues licenses to general contractors and specialty contractors in two main categories: commercial and residential. Residential contractor licenses are further categorized as either residential building licenses or residential remodeling licenses. Specialty licenses are categorized as one of the following: building construction, electrical, highway, street and bridge construction, or heavy construction.
If your dollar volume of work is low, you may not need to be licensed at the state level, but you may still need to obtain a local license or permit, so be sure to seek guidance regarding your particular license or permit requirements.
What Are the Steps in the Licensing Process?
The specifics of the licensing process vary somewhat depending on the type of license. For example, applicants for a specialty license typically need to pass an exam to demonstrate their proficiency in their given trade. And all contractor license applicants must pass the Mississippi Business and Law exam. Testing can be scheduled only after initial submission of a license application and payment of the application fee (currently $200).
Among the other requirements for obtaining a Mississippi contractor license are:
- Registering the business with the state’s Department of Revenue to obtain a Mississippi sales tax or use tax number.
- Purchasing general liability insurance and, for contractors with five or more employees, providing proof of workers’ compensation coverage.
Local licensing authorities may require applicants to purchase a Mississippi contractor’s license bond when applying for a local license. The required bond amount varies by jurisdiction.
Why is a Contractor License Bond Required?
The local licensing authorities that require a Mississippi contractor license bond do so to provide financial protection against damages incurred as a result of a contractor’s failure to comply with the laws, ordinances, and building codes governing the construction industry in those jurisdictions. When a contractor’s unlawful or unethical actions cause financial harm, the injured party (the licensing authority or a client) can file a claim against the bond and be compensated for their loss.
Every contractor license bond is a legally binding contract that brings together three parties: an “obligee,” a “principal,” and a “surety.”
- The obligee, the local government entity requiring the bond,” establishes the required bond amount (or “penal sum”), which is the maximum amount that will be paid out on a single claim.
- The principal, the contractor purchasing the bond, is legally obligated to pay all valid claims against the bond.
- The surety, the bond’s guarantor, investigates claims and guarantees that legitimate ones will be paid.
How Are Contractor License Bond Claims Paid?
Although the principal is legally obligated to pay valid claims, the surety guarantees their payment and typically will pay them initially, on behalf of the principal. That doesn’t erase the principal’s obligation to pay, however. It merely shifts it to repayment of the debt now owed to the surety. The surety is indemnified against any responsibility for claims and can take legal action to secure reimbursement from the principal for claims paid on the principal’s behalf.
How Much Does a Mississippi Contractor License Bond Cost?
Multiplying a bond’s penal sum by the premium rate set by the surety gives you the annual premium for a Mississippi contractor license bond. The premium rate can range from 1% for the most qualified bond applicants to as much as 3% for the least qualified. “Qualified” means “creditworthy” in this context, because the surety’s primary concern is being reimbursed for claims paid on behalf of the principal.
Creditworthiness is measured by the principal’s personal credit score. A high credit score means a low risk to the surety, resulting in a low premium rate. Conversely, a low credit score suggests a higher level of risk and warrants a higher premium rate.
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