Becoming a general contractor is a great way to establish yourself in the construction industry.
Before you can get started with supervising projects and working with subcontractors and suppliers, you’ll need to obtain a general contractor license. Most states require general construction contractors get a license so relevant authorities can ensure applicants have the necessary skills for the role.
What are the steps you need to take to launch your general contracting business? You can find out the essentials in the sections below, but let’s first start with an overview of what the job entails.
What Does a General Contractor Do?
The role of the general contractor is to conduct construction activities on both commercial and residential building projects. General contractors can work on smaller home improvement or commercial projects or take on large-scale ones that involve multiple contracting partners and suppliers—depending on the type of work that interests them.
Often, general contractors coordinate bigger projects. They supervise the performance of the work, which is executed by their teams and by subcontractors. In such cases, general contractors are the leading company on the project. They manage the project’s budget and timeline.
If you become a general contractor, you’ll be in charge of estimating and managing your project’s budget. You’ll need to factor in labor, materials, equipment, and legal permits. You’ll also have to make accurate schedules and plans to ensure the project is completed on time for the owners. You’ll also have to make sure the project complies with all regulations and has the necessary building permits and inspections
You’ll first need to work with engineers and architects on planning and design. Later on, you’ll have to lead the construction team, specialty contractors, and any subcontractors. For example, you’ll need to oversee the work of electricians, plumbers, HVAC specialists, roofing contractors, a handyman and the like. You’ll also have to manage relationships with suppliers who deliver necessary materials.
It’s important to differentiate between a general contractor and a licensed contractor. Sometimes these terms may mean the same thing, but that’s not always the case. A licensed contractor may be a general one, but may also be a specialty or mechanical contractor as well. In some states, you need to get a separate type of license to become a residential or commercial contractor.
How Much Does a General Contractor Earn?
General contractors often earn more than other types of contractors, as they handle project bidding and take on management roles.
Hourly rates for general contractors can range from $25 to $85, depending on years of experience, skills and location. Bonuses can be as high as $20,000, and profit sharing up to $50,000. Combined yearly pay can reach up to $134,000.
#1. Explore Your State’s Contractor License Requirements
Licensing for general contractors is typically required on a state level but may also be mandated on the city and municipality level. There are no nationwide licensing requirements.
Each state and local authority determines the criteria general contractors must meet. This means that getting a general contractor's license in California is a different process than in, say, Florida.
In most places, however, there are a couple of typical requirements that you’ll likely have to satisfy. The licensing process would thus include:
- Meeting minimum education and experience requirements
- Passing the required business and trade exams
- Completing a detailed application form
- Submitting personal and company information
- Providing proof of a registered business entity in the respective state
- Passing background checks
- Posting a contractor’s license bond (a type of surety bond)
- Obtaining general liability insurance, property damage insurance, and workers’ compensation insurance
- Getting an Employer Identification Number (EIN) from the IRS for hiring employees
- Paying application and/or licensing fees
Here are extra details for a few of the bigger states:
In California, you can choose between a Class A license for general engineering and a Class B license for general building work. The authority that issues licenses is the Contractors State License Board.
Florida general contractors need a license from the state Department of Business and Professional Regulation. In addition to the requirements listed above, you’ll also have to provide a certificate of competency from your local licensing office.
General contractors who build one-, two-, and three-family homes in the state of New York have to register with the Department of Buildings.
In Texas, general contractors don’t have to get a state license. Contractors may need a license from their local authorities.
#2. Get the Required Training and Work Experience
Showcasing that you meet the education and experience requirements is often on the list of contractor licensing requirements across the U.S.
A high school diploma, or an equivalent, is typically the minimum education level required. In some cases, you may also need to obtain a college degree.
As for satisfying the requirements for practical years of experience, you can choose between two main options: get a formal degree in construction work management, engineering, architecture, or the like; or obtain a bachelor’s degree.
Another way to meet the work experience requirement is with an apprenticeship where you can gain practical skills. The usual length of a qualifying apprenticeship is three years.
You may also pursue contractor training in addition to the hands-on experience that you get as an apprentice, which can help bolster your knowledge of business management, legal frameworks and building permits, among other topics.
#3. Pass the Contractor Exam
In most states, you need to pass a contractor exam before applying for a general contractor license. States that require you take and pass an exam include California, Arkansas, Louisiana, and Florida, among others.
The exam includes business and legal sections. You may also need to showcase your knowledge of building codes and other relevant topics. The licensing authorities usually provide applicants with a curriculum or a study guide, so that you’ll know what to prepare for.
To get ready for the exam, you can sign up for preparation courses as well. They are different from the general contractor training programs, as they focus only on getting you ready for the test.
If you want to obtain additional specialty licenses to become an electrical contractor, a plumbing contractor, refrigeration specialist, or the like, you will need to take a specialty exam as well.
#4. Obtain All Necessary Paperwork
After getting the right education and appropriate experience AND passing the state exam, it’s time to prepare your documents. You need to submit a full set of paperwork with your license application to get approval from state authorities.
If you don’t have a registered business, this is one of the administrative steps that you will need to check off your list. Typically, it’s the Secretary of State that issues your business registration. You may also have to show your personal and business financial statements and provide fingerprints for a criminal background check.
As noted in the requirements section earlier, most likely you will have to provide proof of a surety bond and various insurance policies. Each of these requirements protects either your business, your customers, or your employees.
#5. Submit Your General Contractor License Application
After you have gathered all the required documents, send your full application to the licensing authority in your state by mail or submit it online. Governing bodies vary across the U.S. but are often called construction licensing boards. For example, in California, it is the Contractors State License Board at the state’s Department of Consumer Affairs that would collect your application.
When the licensing authority receives your application, it usually needs about a month to review it. In some states, construction boards meet a few times per year to approve licenses. You need to send your documents ahead of the upcoming session so that you won’t have to wait too long to get your license.
The respective board then assesses how well you satisfy the state requirements. If you have managed to meet all, you will receive your licensure. In some cases, you may need to provide further documentation or information before the licensing authority can make a decision.
Some states have application fees that you’ll need to pay at the time of applying. In most places, you have to pay an annual or biennial license fee as well.
Take Care Of Payroll and Time Tracking for Your Construction Company
As a general contractor, you will need to handle numerous administrative tasks to run your own company and to manage construction projects. Some of the most common ones include employee time tracking and payroll management, including calculating payroll deductions.
With Hourly, you get a trusted partner in accomplishing these tasks with ease. On top of handling the basics above, you can also save money on workers’ comp, monitor labor costs, and complete other critical tasks that keep your company running smoothly.
Ready to get started? You can download our payroll app and track your construction business’s performance straight from your mobile device.