Contractor License ($25,000) Bond - Statewide in California

Brief Summary

Most people applying for a California license think there is one bond. There are often two, and for an LLC there are three. The $25,000 contractor's bond is the one everybody knows about. If a Responsible Managing Employee or an officer holding less than 10 percent qualifies the license, a separate $25,000 bond of qualifying individual is required on top of it, and the statute says it cannot be combined with the contractor's bond. Sorting that out before you file is the difference between a license issued and an application sitting in a hold queue.

California requires a $25,000 contractor's bond as a condition precedent to issuance, reinstatement, reactivation, renewal, or continued maintenance of a license, under Business and Professions Code section 7071.6. The amount rose from $15,000 to $25,000 on January 1, 2023 under Senate Bill 607. The bond runs in favor of the State of California, must be written by an admitted surety, and the approved form is ordered by the surety directly from CSLB. A holder of a license that has been inactivated is not required to carry the bond while the license is inactive.

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How to Apply for a Contractor License ($25,000) Bond:

• Confirm which bonds apply. The $25,000 contractor's bond always. A $25,000 bond of qualifying individual if an RME or an under 10 percent RMO qualifies the license. A $100,000 worker bond as well if the entity is an LLC.
• Business name and license number exactly as they appear in CSLB records. A mismatch gets the bond rejected.
• Owner or qualifier name, home address and Social Security number for the credit review.
• Complete the bond application and review the quoted premium.
• Pay the premium. The surety orders the CSLB approved bond form directly from the board and files it, signed by an attorney in fact for the surety.
• If an RMO or qualifying LLC member holds 10 percent or more, file the Qualifier Statement of Ownership instead of a second bond.
• Confirm the bond is filed within 90 days of its effective date, and calendar the bond anniversary separately from the license expiration.

Detailed Information About the California Contractor License ($25,000) Bond:

The bond is $25,000, flat, with one exception

Section 7071.6(a) requires a contractor's bond in the sum of twenty-five thousand dollars as a condition precedent to the issuance, reinstatement, reactivation, renewal, or continued maintenance of a license. There is no tier by classification, by revenue, or by contract size. A C-10 electrical contractor and a Class B general building contractor post the same $25,000.

The one exception runs the other way. Under 7071.6(d), CSLB may require an applicant to post a bond in twice the amount, meaning $50,000, until the license is renewed, where the applicant was convicted of a violation of section 7028 or cited under 7028.7, the citation became a final order of the registrar, and the violation constituted a substantial injury to the public. Section 7028 is contracting without a license. If that is in your history, plan on the doubled figure.

The number changed in 2023, and old figures are still circulating

Senate Bill 607, signed in 2021, raised the contractor license bond from $15,000 to $25,000 and the bond of qualifying individual from $12,500 to $25,000, both effective January 1, 2023. Sureties holding blanket endorsements with CSLB had bonds adjusted automatically. Anything still quoting $15,000 is describing the law as it stood before 2023.

The second bond nobody budgets for

Section 7071.9 requires a separate $25,000 bond of the qualifying individual when the person qualifying the license is not a proprietor, general partner, or joint licensee. In practice that means a Responsible Managing Employee, or a Responsible Managing Officer who does not hold enough ownership.

The exemption is specific. An RMO who owns 10 percent or more of the voting stock of the corporation may be exempt by certifying that ownership on a form prescribed by the registrar, and a qualifying member of an LLC holding at least 10 percent membership interest can claim the same exemption. CSLB calls the certification the Qualifier Statement of Ownership. Federally recognized participating tribes are not subject to the requirement. Section 7071.9 states plainly that this bond is in addition to, and shall not be combined with, the contractor's bond.

One more trap on the back end. If an RMO stops holding the 10 percent stake, the exemption goes away and the license goes into bond suspension until the qualifier bond is filed.

LLCs carry a third instrument and an insurance requirement

An LLC license requires a $100,000 employee and worker bond under section 7071.6.5, on top of the $25,000 contractor's bond. It covers employees or workers damaged by the LLC's failure to pay wages, interest on wages, or fringe benefits, and CSLB applies it to active and inactive licenses, renewals and reinstatements. That is worth reading twice. The contractor's bond falls away when a license goes inactive. The LLC worker bond does not.

Section 7071.19 adds liability insurance for LLCs, a cumulative limit of $1 million for an LLC with five or fewer members listed as personnel of record, plus $100,000 for each additional member, capped at $5 million.

Who the bond actually pays

Section 7071.5 makes the bond payable in favor of the State of California for the benefit of a homeowner contracting for home improvement on a personal family residence, a property owner contracting for construction of a single family dwelling not intended for sale, a person damaged by a willful and deliberate violation of the chapter or by the licensee's fraud in executing or performing a construction contract, and an employee of the licensee damaged by failure to pay wages.

Section 7071.6(b) then caps things. Excluding claims by the beneficiaries specified in 7071.5(a), the aggregate liability of the surety on claims against the bond may not exceed $7,500, and bond proceeds above $7,500 are reserved exclusively for those beneficiaries. This is not a performance bond and it does not stand behind ordinary contract disputes.

Timing and the 90 day rule

A license expires two years from the last day of the month in which it was issued, or two years from the date the renewed license last expired, under section 7140. The bond and the license run on separate clocks, so a bond can lapse in the middle of a license period. If the surety cancels, the license goes into bond suspension and any work performed while suspended is treated as unlicensed. A replacement bond has to be filed within 90 days of its effective date to avoid a gap, and section 7083 requires notifying CSLB of a license change within 90 days. Section 7071.7 allows a late bond to be accepted retroactively where the delay was beyond the licensee's control, on CSLB form 13B-31.

Cash instead of a bond, if you want to tie up the money

CSLB accepts a cashier's check or bank certified check payable to the Contractors State License Board in place of the bond, $25,000 for the contractor's bond and $25,000 for the qualifier bond. Certificates of deposit, savings passbooks and credit union certificates are no longer accepted. The catch is the hold. A deposit is not released until three years after the expiration of the license period, or three years after inactivation, expiration, cancellation or revocation, whichever comes first.

Eligibility and Requirements for a California Contractor License ($25,000) Bond:

• An admitted surety insurer authorized by the California Department of Insurance.
• Bond amount of exactly $25,000 for the contractor's bond, or $50,000 where CSLB imposes the doubled bond under 7071.6(d).
• Executed in favor of the State of California, on the CSLB approved form obtained by the surety from the board.
• Business name and CSLB license number on the bond matching board records exactly.
• Signature of the surety's attorney in fact.
• Filed with the Registrar within 90 days of the bond's effective date.
• Credit review of the owner or qualifier. At this bond size credit generally sets the rate rather than eligibility.

California Contractor License ($25,000) Bond FAQs:

Official and Additional Resources for the California Contractor License ($25,000) Bond: