Starting out as a contractor can feel like walking a tightrope. You’re trying to build your business, get clients, and make money—all while navigating a maze of regulations. One of the big questions that comes up is: When do I need a contractor’s license, and is there any way around it? Let’s dive into the nitty-gritty based on a recent conversation I had on this very topic.
At What Point Should You Consider Getting a General Contractor’s License?
It all boils down to the dollar amount of your projects. In Tennessee, you can legally take on jobs up to either $20,000 or $25,000 without a contractor’s license. The exact number is a bit fuzzy—it’s worth double-checking before you dive in. But the bottom line is, as long as your project stays under that threshold, you’re in the clear.
However, the minute you start eyeing bigger jobs, it’s time to think about getting licensed. The state requires you to have a contractor’s license to bid on anything above that $20,000-$25,000 mark. If you’re serious about growing your business, it’s better to get ahead of this. The earlier you secure your license, the smoother your growth will be.
How to Get Licensed
Getting your contractor’s license isn’t as daunting as it sounds. You can find everything you need on the Tennessee Licensing Board’s website. It costs about $250 per qualification to take your test, which isn’t too bad considering the doors it opens for your business.
If you’re focused on a specific area—say utilities—you’ll want to start with the relevant classification, like the MU (Municipal Utilities) classification. From there, you can add more classifications over time as you grow and diversify. The test itself? If you’ve been in the field for a while, most of it should feel like common sense. But don’t get cocky—there’s some terminology and details that might trip you up, so give yourself a few weeks to study.
Can You Get By Without a License?
Now, let’s say you’re not ready to jump into the licensing process just yet. There’s an option that many contractors explore: working under an established General Contractor (GC). Essentially, you bid on projects, but the GC covers you with their license. This arrangement can work well, especially if you’ve built a solid relationship with the GC.
But there’s a catch—well, several catches, actually. First, the GC is still on the hook for the job. Their license is at risk, so they have to trust you to deliver quality work. And while this setup can keep you under the radar, don’t think you’re immune to scrutiny. If you’re consistently taking on projects above that $25,000 threshold, the state might come knocking, and at some point, they’ll likely expect you to have your own license.
The Fine Line and the Loopholes
There are some gray areas where subcontractors can operate without their own license, particularly if they’re working under a licensed GC. The specifics of these loopholes can be tricky, varying by state and situation. You might be able to handle more significant projects and bigger budgets under these conditions, but there’s a limit to how far you can push this.
The advice here is simple: If you’re regularly handling jobs over $25,000, just get your license. You can always keep it in your back pocket while continuing to work with the GC. But having that license gives you a safety net. Plus, it future-proofs your business. Who knows? One day that GC might decide they’re done dealing with subcontractors, and if you’re not prepared, you’ll be left high and dry.
Final Thoughts: Plan Your Own Future
At the end of the day, it’s about planning your future. Sure, there are ways to get by without a license, but they come with risks. Having your own license gives you more control over your business, opens up more opportunities, and ensures you’re not dependent on someone else’s goodwill. If you’re serious about building a sustainable contracting business, it’s worth the time and investment.
So, if you’re asking, “Do I really need a contractor’s license?” the answer is pretty clear: Yes, you do. Maybe not today, maybe not tomorrow, but sooner or later, you’ll thank yourself for getting it.