Permit bonds, also known as license bonds, are a specific type of commercial bond required by government agencies. The license bond is necessary to ensure the agency’s engagement in business is considered legal with the company being legally licensed. The legal licensing protects the company workers and customers by ensuring there is a full adherence to federal and state regulations; as well as a guarantee for the agency to perform according to the required building and safety codes. This article will provide more information regarding the permit bonds, which they are created for and why they are necessary. Don’t forget that you can also go to Enderson Review to delve a little bit deeper.
1. The Different Parties Involved
When filing for a license and permit bond, it is important to note that three separate parties will be involved. The first party will be the contractor; the second will be the customer or person requiring the bond; and the third is the company offering the permit bond. The customer will pay a contractor to complete a particular service with the license bond being the guarantee that all required government and local regulations will be followed by the stated company. If, for any reason, the contractor fails to comply with regulations, the company providing the bond will be liable to pay the customer for any work not completed.
2. Permit Bonds Required In Different Industries
The license bond is a requirement for contractors in the majority of states, but is most common for those working in the carpentry and construction industries. Companies trading in fishing and hunting licenses will also be required to hold a permit bond. Of course, the need for a bond is fully dependent on the state and the type of business being completed.
3. Permit Bonds Are Not Small Business Insurance Policies
It is common for people to confuse a license bond with a small business insurance policy; however, these items are different and their difference must be noted. A small business insurance policy is an item that protects the contractor who has purchased the plan. The permit or license bond, however, is an item that protects the customer instead of the contractor.
4. Penalties For Illegal Practice
It is not possible to practice without a license of permit bond unless you are looking to operate the company illegally. According to the particular state, it is necessary to obtain the required license bond in order to avoid both financial penalties and criminal charges. As is stated, certain states do not require industry licensing; however, if the company fails to follow the state and federal regulations you will be required to pay large penalties and serve jail time. It may also be possible that the company could experience legal recourse from customers if anything goes wrong and the company does not have any licensing.
5. Credit History For Permit Bonds
Contrary to popular belief, you will not need a strong credit score to purchase a permit bond. Obviously, a high credit score would make the application process simpler, but financial issues can be overcome when searching for the essential permit or license bonds.