Builders and Contractors Exchange
Weekly Bulletin: 25 apr 2008
The ABCs of Contractor Licensing: What You Need to Know
As many of you already know, to do construction work in Virginia, you must get the appropriate licensure from the Virginia Board for Contractors. Unfortunately, there is often some confusion regarding which license - A, B, or C - is the appropriate license for a given contractor. Likewise, many contractors are unaware of all the requirements necessary to acquire such licensing. As such, a number of honest contractors are operating under the wrong license given the aggregate gross amount of their yearly contracts and/or the experience level of the "Designated Employee" listed for each trade on the license. This is especially commonplace with emerging or small firms that concentrate on completing a large volume of small contracts in a year, as opposed to looking for the "big score" contract.
The Basics: To get a license you must specify a full-time employee from your firm to be a "Designated Employee" (or a member of "Responsible Management" in cases where the entity is applying for its initial licensure) in a respective trade or discipline in order for that trade or discipline to be reflected on your license. Each such employee must have a set number of years' worth of experience in that specific trade or discipline (5 years for Class A, 3 years for Class B, and 2 years for Class C). Moreover, effective August 21, 2006, the designated employee listed for Class A and B licenses must have also completed an eight-hour business class approved by the Board of Contractors and an exam. The Class A Contractor's exam is more comprehensive than the Class B exam. To become a Class A or B builder, one must also pass the Virginia Class A or Class B Building Contractor License Exam. In the case of Class C "certificates," an owner, officer, or partner of the entity must take the mandatory eight-hour Business Course.
The Financial Basics: To obtain a Class A contractor's license, an entity must have a single project contract over $120,000 OR annual sales equaling greater than $750,000 in aggregate. There is an additional requirement that mandates Class A contractors show a net worth of a minimum of $45,000. Note that there is no cap on the amount of annual sales a Class A contractor can earn. Class B contractors can work on single contracts between $7,500.01 and $120,000 when their annual sales do not exceed $750,000 in aggregate. There is an additional requirement that mandates Class B contractors show a net worth of a minimum of $15,000. Class C contractors can work on single contracts between $1,000.01 and $7,500 OR when their total yearly contracts do not exceed $150,000 in aggregate. Class C contractors have no net worth requirements.
As such, it is important for contractors to remain vigilant of their aggregate sales amounts. For instance, if none of your firm's project contracts individually exceed $5,000 but your total yearly revenue exceeds $150,000, you will need a Class B license. A Class C "certificate" would be sufficient only if the total revenue your firm earned in a given year was $150,000 or less. Also, contractors need to ensure that their respective "Designated Employee(s)" has or have completed the requisite exams. Any violation of the above requirements places your firm in violation of its licensing obligations and subject to penalties meted out by the Board for Contractors as authorized by statute.
Questions?
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This article is meant to bring awareness to this topic and is not intended to be used as legal advice.