In this article, we’ll walk you through everything you need to get a contractor license in the state of North Dakota.
Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your North Dakota contractor license bond needs.
What Contractor Licenses Are Issued in North Dakota?
All contractors working in North Dakota on projects valued at $4,000 or more must be licensed at the state level. This applies to both general and specialty contractors. In fact, depending on the type of work you do you may need to acquire both a general contractor license and a specialty contractor license.
There are four different classes of general contractor licenses:
|Maximum Project Value/Cost||Initial Application Fee|
|Class A||No Limit||$450|
What Are the Steps in the Licensing Process?
North Dakota’s process for licensing general contractors is relatively straightforward. You’ll need to obtain a North Dakota Sales and Use Tax permit and register your business with the state, as well as provide proof of general liability insurance. If you have employees, you’ll also need evidence of sufficient workers’ compensation insurance.
Unlike many states, there is no testing or bonding requirement at the state level in North Dakota. Some municipalities, however, require local licensing and a contractor license surety bond. The City of Grand Forks, for example, requires contractors to furnish a $5,000 bond when applying for a local license.
Why is a Contractor License Bond Required?
When a local contractor license bond is required, the purpose is to provide financial protection for the municipality and its residents against financial loss caused by a licensed contractor’s unlawful or unethical acts, such as a violation of the local building code. An injured party has the right to file a claim against the bond and seek compensation for their loss.
How Are Contractor License Bond Claims Paid?
There are three parties to a contractor license bond, which is a legally binding contract:
- The local licensing authority, as the party requiring the bond, is the bond’s “obligee.”
- The contractor applying for a new or renewal license is the bond’s “principal” and is legally obligated to pay valid claims.
- The agency serving as the bond’s guarantor is known as the “surety.”
While the principal is legally obligated to pay all claims the surety deems valid, as the guarantor the surety will pay a claim initially, and then collect repayment from the principal. Failure to repay the surety can result in the surety taking legal action to recover the amount owed by the principal for any claim paid on the principal’s behalf.
How Much Does a North Dakota Contractor License Bond Cost?
The annual premium cost for a local contractor license bond in North Dakota is a small percentage of the required bond amount established by the obligee. The surety determines what that percentage (the premium rate) will be based on an underwriting assessment of the risk that the surety won’t be reimbursed readily for claims paid on behalf of the principal.
If your personal credit score is high, the risk is considered to be low, and your premium rate could be as low as 1%. The reverse also applies. A low credit score results in a high premium rate, perhaps as high as 3%.
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