Surety Bond Encyclopedia

General Contractor License Group 4 ($250,000) Bond - Statewide in South Carolina

Brief Summary

This bond is a choice, not a mandate. South Carolina lets a Group 4 general contractor qualify either by filing a financial statement showing $250,000 net worth or $175,000 working capital, or by posting a $250,000 surety bond instead. Contractors who do not want to show a balance sheet to the Board, or who cannot hit the net worth line, use the bond. Note the amount tracks net worth, so the bond route costs you the $250,000 figure even though the working capital path is lower.

Section 40-11-262 of the South Carolina Code lets an applicant provide a surety bond in place of the financial statement required by section 40-11-260, in the same amount as the net worth for the applicant's license group, with the initial or renewal application. For a general contractor Group 4 license, which carries a bid limit of up to $3,000,000 and a net worth requirement of $250,000 or working capital of $175,000, the bond amount is $250,000. The bond lists the State of South Carolina as obligee, must be continuous in form, and must be maintained for as long as the license is held or until the licensee files a financial statement meeting the net worth requirement.

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How to Apply for a General Contractor License Group 4 ($250,000) Bond:

Confirm the license group and the trade. General contractor Group Four is a $250,000 bond. Mechanical contractor Group Four is a different schedule entirely.
Decide between the financial statement and the bond. A Group Four initial application or upgrade on the financial statement route requires a compilation by a CPA or PA.
Legal entity name exactly as it appears on the LLR license application.
Company financial statements and owner personal financial information for the surety's underwriting file.
Owner or officer name, home address and Social Security number for the credit review.
Complete the bond application and review the quoted premium along with any indemnity or collateral terms.
Pay the premium and have the surety execute the LLR Surety Bond for General Contractors at a $250,000 penal sum, continuous in form.
File the bond with the initial or renewal application to the Contractor's Licensing Board.
Keep the bond in force for as long as the license is held, or until you file a financial statement showing the group's net worth requirement is met.

Detailed Information About the South Carolina General Contractor License Group 4 ($250,000) Bond:

The group schedule, and where the $250,000 comes from

Section 40-11-260 sets the financial requirement by license group. For general contractors:

Group One, bids up to $100,000, $20,000 net worth or $10,000 working capital
Group Two, bids up to $400,000, $60,000 net worth or $40,000 working capital
Group Three, bids up to $1,000,000, $150,000 net worth or $100,000 working capital
Group Four, bids up to $3,000,000, $250,000 net worth or $175,000 working capital
Group Five, unlimited bids, $350,000 net worth or $250,000 working capital

Section 40-11-262(A) then allows an applicant, in lieu of providing a financial statement showing minimum net worth or working capital, to provide a surety bond from a surety authorized to transact surety business in this State in the same amount as the net worth for the applicant's license group, with the initial or renewal application.

So the bond is keyed to the net worth column, not the working capital column. Group Four is $250,000. The LLR bond package prints the same ladder, $20,000, $60,000, $150,000, $250,000 and $350,000 for Groups One through Five.

One warning worth repeating. Mechanical contractor groups use a different schedule entirely, where Group Four is $60,000 net worth and a bid limit of $400,000. If you hold both, do not carry one figure over to the other.

The bond is optional, and reversible

Nothing requires a South Carolina general contractor to carry a surety bond to hold a license. The bond exists so a contractor can qualify without opening its books to the required degree, or when the numbers do not reach the threshold.

Section 40-11-262(B) requires the bond to be continuous in form and maintained in effect for as long as the applicant maintains the license, or until the applicant submits a financial statement showing that it meets the net worth requirements. That second clause is the exit. Once your balance sheet supports the group, file the statement and the bond can come off.

Who it protects

The bond lists the State of South Carolina as obligee, and it runs for the benefit of any person who is damaged by an act or omission of the applicant constituting a breach of a construction contract or a contract for the furnishing of labor, materials, or professional services for construction undertaken by the applicant, or by any unlawful act or omission of the applicant in performing construction. The LLR form names the South Carolina Contractor's Licensing Board, the State of South Carolina, and any person or business sustaining damage.

That is broad. Owners, subcontractors and suppliers all fit the description, which is part of why the underwriting on this is closer to contract surety thinking than to a small license bond.

It does not replace any other bond

Section 40-11-262(B) states plainly that the bond is in addition to, and not in lieu of, any other surety bond required of the applicant by law or regulation, or by any party to a contract with the applicant. Filing it does nothing for a payment and performance bond a project owner requires, and a project bond does nothing for this filing.

Cancellation, and the ten day scramble

Under section 40-11-262(C), a surety may cancel on thirty days notice, and on cancellation the licensee has ten days to provide proof of meeting the net worth requirements or face suspension. The LLR form gives the surety or the principal the right to cancel by filing written notice with at least thirty days notice before the effective date.

Ten days is not long enough to assemble a compiled financial statement from scratch. If a surety signals non renewal, start the accountant conversation the same week.

The Board can move the number

Section 40-11-262(E) lets the board require an increased bond amount based on the severity of a violation, and permits a reduction after one year where corrective action is demonstrated. The published group ladder is the starting point, not a ceiling for a licensee with a disciplinary history.

Renewal and paperwork

Licenses may be renewed biennially, and a licensee applies to the department for renewal by the expiration date on a form approved by the board. Because the bond is filed with the initial or renewal application, the two run together on the same two year cycle.

If you go the financial statement route instead, the Board's requirements differ by group. A Group Four general contractor initial application or upgrade takes a compilation by a CPA or PA, while a Group Four renewal accepts a self prepared notarized statement. Group Five is the only tier requiring an audit at application and a reviewed or audited statement at renewal.

Section 40-11-50 on license fees was repealed by 2014 Act No. 207, and current sections refer to all required fees without printing amounts, so confirm the current fee schedule with LLR rather than relying on a figure quoted elsewhere.

Eligibility and Requirements for a South Carolina General Contractor License Group 4 ($250,000) Bond:

A surety authorized to transact surety business in South Carolina.
Penal sum of $250,000, matching the net worth requirement for general contractor Group Four.
Continuous in form and maintained while the license is held.
State of South Carolina listed as obligee, with the Contractor's Licensing Board and damaged persons named on the LLR form.
For the benefit of any person damaged by a breach of a construction contract or a contract for labor, materials or professional services, or by an unlawful act or omission in performing construction.
In addition to, not in lieu of, any other surety bond required by law, regulation or contract.
Filed with the initial or renewal license application.
Underwriting review of the company. At this penalty the surety looks at financial statements, work in progress and experience, not just credit.

South Carolina General Contractor License Group 4 ($250,000) Bond FAQs:

Is this bond required to hold a South Carolina general contractor license?

No. Section 40-11-262(A) offers it in lieu of providing the financial statement showing minimum net worth or working capital required by section 40-11-260. A contractor who documents the net worth or working capital for its group does not file a bond at all.

Why $250,000 for Group Four?

Because the bond is set in the same amount as the net worth for the applicant's license group, and general contractor Group Four requires $250,000 net worth. The working capital alternative for that group is $175,000, but the bond tracks the net worth number, not the working capital number.

What are the other groups?

For general contractors, Group One is a $100,000 bid limit with $20,000 net worth or $10,000 working capital, Group Two is $400,000 with $60,000 or $40,000, Group Three is $1,000,000 with $150,000 or $100,000, Group Four is $3,000,000 with $250,000 or $175,000, and Group Five is unlimited with $350,000 or $250,000. The LLR bond package prints matching penal sums of $20,000, $60,000, $150,000, $250,000 and $350,000.

Is the mechanical contractor schedule the same?

No. Mechanical contractor Group Four is a $400,000 bid limit with $60,000 net worth or $40,000 working capital. Mixing the two schedules is a common and expensive error.

Can I ever drop the bond?

Yes. Section 40-11-262(B) requires the bond to be maintained for as long as the applicant maintains the license or until the applicant submits a financial statement showing that it meets the net worth requirements. Once the balance sheet supports the group, file the statement.

Who can claim against it?

Any person damaged by an act or omission of the licensee constituting a breach of a construction contract or a contract for the furnishing of labor, materials or professional services for construction undertaken by the licensee, or by any unlawful act or omission in performing construction. The LLR form names the Board, the State, and any person or business sustaining damage.

Does it satisfy the payment and performance bond on my projects?

No. Section 40-11-262(B) states the bond is in addition to, and not in lieu of, any other surety bond required by law or regulation or by any party to a contract with the applicant.

What happens if the surety cancels?

Section 40-11-262(C) allows cancellation on thirty days notice, and gives the licensee ten days after cancellation to provide proof of meeting the net worth requirements or face suspension. The LLR form also lets the principal cancel on at least thirty days written notice.

Can the Board require more than $250,000?

Yes. Section 40-11-262(E) permits the board to require an increased bond amount based on the severity of a violation, and to reduce the amount after one year where corrective action is demonstrated.

When do I renew?

Licenses may be renewed biennially, and the licensee applies to the department for renewal by the expiration date on a board approved form. The bond is filed with the initial or renewal application, so both run on the same two year cycle.

What will the bond cost?

Premium is a percentage of the $250,000 penal sum, set by the surety after a real underwriting review rather than from a rate table. Because the bond answers for breach of construction contracts, sureties look at it much the way they look at contract surety: financial statements, working capital, work in progress and completed project history, banking and supplier references, years in business and the owners' credit, with personal indemnity. A contractor with a strong balance sheet prices at the low end of a surety's filed rates. Applicants using the bond precisely because they cannot document net worth price higher and often face collateral or an indemnitor requirement, so compare the cost of the bond against the cost of a CPA compiled financial statement before committing.