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Need assistance? +1 815-826-6324 (815-8-BondAI) phil@AmericasSuretyBonds.com
Expert Surety Bonds Since 2004
Group 5 is the only general contractor tier where the financial statement route requires a full audit by a CPA or PA at initial application, and a reviewed or audited statement at renewal after that. That is the real comparison. A $350,000 surety bond under section 40-11-262 lets you skip the audit entirely and qualify for unlimited bid authority. Price the bond against what your accountant charges for the audit before deciding.
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, filed with the initial or renewal application. General contractor Group 5 carries unlimited bid authority and a $350,000 net worth requirement or $250,000 working capital, so the bond amount is $350,000. 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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Section 40-11-260 sets the financial requirement by license group. For general contractors:
Section 40-11-262(A) 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.
The bond follows the net worth column. Group Five is $350,000, not the $250,000 working capital figure. The LLR bond package prints the same ladder, $20,000, $60,000, $150,000, $250,000 and $350,000 for Groups One through Five.
Mechanical contractor groups run on a separate schedule, where Group Five is $300,000 net worth or $200,000 working capital. Do not carry a figure from one trade to the other.
The Board's financial statement requirements escalate by group. Groups One and Two file self prepared notarized statements. Groups Three and Four file a compilation by a CPA or PA at initial application or upgrade, and may file a self prepared notarized statement at renewal.
Group Five is the outlier. An initial application or upgrade takes an audit by a CPA or PA, and renewals take a reviewed or audited statement by a CPA or PA. That is the most expensive and most intrusive path on the schedule, every renewal cycle, forever.
The surety bond under 40-11-262 replaces the financial statement entirely. For a contractor that would otherwise be paying for an annual or biennial audit, the comparison is straightforward and often favors the bond.
Nothing requires a South Carolina general contractor to carry a surety bond to hold a license. 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. File a qualifying statement and the bond comes off.
The bond lists the State of South Carolina as obligee and 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.
Owners, subcontractors and suppliers all fit that description, which is why sureties underwrite this closer to contract surety than to a small license bond.
Section 40-11-262(B) states 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 an owner requires on a job, and holding project bonds does nothing for this filing.
Section 40-11-262(C) permits cancellation 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.
For a Group Five licensee that would be ten days to produce an audit, which is not realistic. If a surety signals non renewal, engage the accountant immediately or place a replacement bond.
Section 40-11-262(E) allows 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. The published ladder is the starting point, not a cap for a licensee with a disciplinary record.
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. Since the bond is filed with the initial or renewal application, both run on the same two year cycle.
Section 40-11-50 on license fees was repealed by 2014 Act No. 207, and the current sections refer to all required fees without stating amounts, so confirm the fee schedule with LLR rather than relying on a number quoted elsewhere.
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 that documents $350,000 net worth or $250,000 working capital does not file a bond.
Because the statute sets the bond in the same amount as the net worth for the applicant's license group. Group Five net worth is $350,000. The $250,000 figure is the working capital alternative on the financial statement route, and the bond does not track it.
Section 40-11-260 puts Group Five at unlimited bids. The lower groups are capped at $100,000, $400,000, $1,000,000 and $3,000,000 for Groups One through Four.
Because of what the alternative costs. The Board requires an audit by a CPA or PA for a Group Five initial application or upgrade, and a reviewed or audited statement at renewal. Groups One and Two file self prepared notarized statements, and Groups Three and Four file a CPA compilation at application. The bond replaces the financial statement, audit included.
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.
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.
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.
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. For a Group Five licensee that means having a qualifying statement ready or a replacement bond in motion well before the effective date.
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 it after one year where corrective action is demonstrated.
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.
Premium is a percentage of the $350,000 penal sum, set by the surety after a full underwriting review rather than from a rate table. Because the bond answers for breach of construction contracts, sureties evaluate it much as they evaluate contract surety: audited or reviewed financial statements, working capital, backlog and work in progress, completed project history, bank and supplier references, years in business, and the owners' credit with personal indemnity. A well capitalized contractor with a clean history prices at the low end of a surety's filed rates. A contractor using the bond specifically because it cannot document $350,000 net worth prices higher and may face collateral or an outside indemnitor. Weigh the premium against the cost of the CPA audit the financial statement route would require.
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