How to Become a Contractor in the US

surety bond - Who is a contractor - building in gray shade

Who is a contractor?

Contractors provide goods and services to another party for compensation. A contractor can be anyone who performs work on some other business’s behalf. This person is not an employee of that company, but rather some form of subcontractor (either by choice or necessity) who has offered their services in exchange for payment. 

This relationship would make the contractor a type of independent business owner. Contractors are usually involved with construction-related activities like home renovation, carpentry, landscaping, roofing, and many others. Some contractors may also specialize in less tangible things like event planning or even software development.

There are more than 20 million businesses under this contracting umbrella in the United States alone. The industry employs over 24 million people who generate more than $1 trillion in revenue.

What does it mean to work as a contractor?

As a contractor, you have heard this many times before: surety bonds are a sure thing. What does this mean for you?

A surety bond is something of value that one party (the obligee) gives to another party (the surety/insurer). The surety guarantees the fulfillment of the obligation by the principal in case of default. A surety bond is an insurance product that financially guarantees compliance with contract specifications and deadlines specified or implied by written agreements between two parties or more, one of them being the surety company providing the surety bond. 

Working as a contractor means always having to be keen on what your client wants from you so there can’t be any mistakes in quality, timeliness…etc., but sometimes those mistakes happen. Sometimes those mistakes lead to failures, which means surety companies may not want to work with you anymore because of the possibility of future failure and surety bond claims that would be made against them.

What if I am denied a surety bond?

When a surety company decides to deny surety bonds (or renewals on existing surety bonds) for any contractor, it has significant implications for that contractor’s business continuity and cash flow. 

A surety company’s decision to deny surety bonds or renewals is especially critical when it comes to contractors working on federal projects such as large infrastructure projects such as bridges, roads, dams…etc., where under contract terms of their project agreement they are required to post a surety bond in favor of the government entity commissioning the project.

The surety companies’ decision to deny surety bonds or renewals is often made after numerous claims, violations, and fines related to the project (for example) have piled on over several years. This means that any contractor working on a federal project may be denied surety bond coverage by all surety companies, which can have a significant impact on his future cash flow and ability to do business as usual since many contractors rely heavily on surety bonds issuance for their businesses continuity and growth.

Surety companies will only consider surety bond applications from those contractors who have clean records free of surety claim issues, project delays/failures…etc., during the last 3-5 years at least. F must also prove minimal work experience in the industry, and the surety company may also investigate other aspects of surety bond applications such as credit history to ensure surety bond responsibility is minimized should there be a surety claim.

What are the things needed to become a contractor for a construction project?

The process of becoming a contractor can be quite difficult. Contracting is a highly competitive field and being successful requires the right combination of hard work, knowledge, skills, and resources. In order to become a contractor for construction projects most people need to accomplish the following:

People who want to have their own contracting business must have at least here are different requirements or qualifications one needs in order to apply as a contractor and these depend on the type of work he is going to do. For instance, a person who wants to be a plumbing contractor must have completed an apprenticeship program in order to be qualified. A person who is planning to become a roofing contractor is not required to have any special license or qualification but he should at least know how to read blueprints and gather the materials for this job.

A company that wants a construction manager will definitely look for someone with either a degree in civil engineering, scheduling, or business administration. If a person has already completed his apprenticeship for this kind of job, he may be considered qualified to apply. Even if the company is not looking for an apprentice, he can still work for them as long as he can pass their test and produce his own license.

On the other hand, construction companies who want a foreman will not require a certain qualification. But he must be able to supply the company with a list of men who are going to work under him and a detailed explanation of his plan for the next five years. This foreman must also have experience in this field as well as good references from previous employers.

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