Flooring Company Licenses, Bonds, Builder Contracts

A flooring company's paperwork has three layers. First, a license or registration that depends on the state. Second, bonds that follow from the license or the customer. Third, builder, property manager and landlord contracts that set insurance terms. Each can be tied to the seller's entity or to a qualifying person who may leave, so do not assume any of it moves to you at closing. Check each one. This guide shows what to check, what a few state examples reveal and how to read the insurance clauses in the contracts that drive your revenue.

The short answer

There is no single flooring license. California licenses flooring as its own classification, Washington registers installers and requires a bond and liability insurance, and other states differ.
A license, qualifier or bond may belong to the seller's entity or a person who is leaving. Ask the state board what is needed in your name and when.
Customer contracts set the insurance terms: additional insured status, primary and noncontributory wording, waivers and umbrella amounts. Read each one against your policy.
Bonds are not insurance for you. The surety expects to be repaid, and new owners usually sign new indemnity agreements.
A certificate of insurance is evidence of cover, not the policy itself.

Which licenses, registrations and bonds can a flooring company need?

The same flooring work can need a specialty license in one state, a registration in another and nothing at state level in a third. Cities and counties add their own rules. The table shows four examples. It is not a state-by-state map and not legal advice, so check your own states.

Examples of flooring licensing and registration rules
Place	What the rule says	Why it matters in a sale
California: license and qualifier	Flooring and floor covering is its own contractor classification (C-15). A corporation's license must be qualified by a responsible managing officer or a responsible managing employee. An LLC's license can also be qualified by a responsible managing manager or member. An employee qualifier must be a bona fide employee actively engaged in the classification. Confirm which qualifier route fits your entity with the Contractors State License Board (CSLB)	A sole owner license cannot be sold or transferred to another person or company, with narrow exceptions. The CSLB says some license numbers may be reissued to an LLC in limited cases, so ask what applies to your deal. Changes must be reported within 90 days. An unlicensed contractor generally cannot sue to collect payment for work that needed a license
California: bonds and proof of cover	The contractor license bond is $25,000. A separate $25,000 bond applies if a responsible managing employee qualifies the license or a responsible managing officer owns less than 10 percent of a corporation's voting stock. A workers' comp certificate must be on file unless the applicant has no employees and files a statement saying so (the exemption does not apply to every classification, so check yours)	A new license needs fees, a new bond and proof of workers' comp
Washington	Contractor registration covers "the installation of carpeting or other floor covering." The bond is $30,000 for a general contractor or $15,000 for a specialty contractor, and an assigned savings account may be filed instead. Registration also requires general liability insurance at the minimums in the Revised Code of Washington (RCW) section 18.27.050, so confirm the current amounts with the Department of Labor and Industries	Confirm which category applies to your work. Washington is also a state fund state for workers' comp, with its own successor rules for unpaid premiums (RCW 51.16.200)
Massachusetts	Contractors and subcontractors must be registered for residential contracting agreements over $1,000, and the registration number goes in the contract	Whether interior flooring counts as residential contracting under the statute should be confirmed with the state agency
Florida	The statute defines a specialty contractor by a board rule category and does not name flooring, carpet or tile	Do not assume either way. Ask the state board and the county about licenses and local business tax receipts

Federal rules sit on top. The Environmental Protection Agency requires firm certification for paid work that disturbs painted surfaces in homes built before 1978 and in child-occupied facilities, including for sole proprietors. A showroom may also need local business licenses and a state sales tax permit.

What happens to the license when you buy the company?

It depends on the state and the deal structure, and a license may not move at all. In California, for example, licenses belong to the business entity, and the qualifier is tied to the licensed company. If the seller was the qualifier and is leaving, the company may be unable to keep its license in force. Lenders ask about this too: for any Small Business Administration (SBA) 7(a) loan, the lender must get evidence of all licenses required to run the business within 90 days after final disbursement. The SBA rulebook expanded its definition of a key employee to include someone with the license to run the business. Whether a consulting seller can stay on as the license qualifier is a state licensing question, so ask the board before your plan depends on it.

Practical steps: ask the licensing board what a change of owner or qualifier requires, check whether the qualifier will stay and on what terms, and confirm any bonds and workers' comp proof in your name. See when the seller holds the contractor license, whether surety and license bonds transfer and buying a business in a licensed trade.

What insurance do builders and property managers ask for?

Customers often ask a flooring subcontractor for the items below. They are contract terms, not rules for every job, and each customer sets its own limits, so no standard limit is given here.

Common insurance clauses in flooring contracts
Clause	How it is delivered	What it means for a flooring crew
Additional insured while working	Endorsement to general liability, for example Insurance Services Office (ISO) commercial general liability (CG) form CG 20 10 or a similar form	The builder or owner is added to your liability policy for injury or damage caused at least partly by your ongoing work. Check the form edition the contract names
Additional insured after the job	A separate completed operations endorsement, such as CG 20 37	Matters because floors are used immediately. It applies to your work at the scheduled location, and paid losses can erode the completed operations aggregate
Primary and noncontributory	Endorsement	Your policy responds first. ISO's CG 20 01 endorsement applies only if the other party is a named insured on the other policy and a written contract requires it. Carriers also use their own wording, so read the form that is attached
Waiver of subrogation	Endorsement on each policy that needs it	The insurer gives up recovery from the customer. ISO's scheduled waiver form (CG 24 04) applies only if the waiver was agreed in a written contract before the loss. Other forms vary
Hold harmless	The policy's insured contract definition	You agree to take on some of the customer's liability, and your liability policy may respond only through its insured contract wording. Many states have anti-indemnity statutes that limit this, so ask your attorney
Umbrella, auto, workers' comp certificates	Separate policies and certificates	Amounts come from the contract

See additional insured, additional insured, waiver and primary wording for new owners and how to check customer contracts against your policies.

What do leases, lenders and retailer programs add?

Lease. A showroom or warehouse lease may ask for a menu of cover: commercial general liability, umbrella, commercial auto, property, business income, workers' compensation and employers liability, and it may require the landlord to be named as additional insured. Check each line against your policies. See lease insurance requirements for new owners.
Lender. A lender may ask for property insurance on pledged equipment and inventory and, at its discretion, more. Read the loan agreement for the exact terms.
Franchise or retailer program. A franchise agreement or a retailer's installation program may carry its own insurance and indemnity terms, so read yours. If revenue depends on one program, check the agreement for insurance, indemnity and termination terms, and what changes after a change of control.

Do you need bonds, and who do they protect?

Some commercial and public work asks for payment and performance bonds. A performance bond promises that the contractor will perform in line with the construction contract and protects the owner up to the bond amount. Whether flooring subcontractors are asked depends on the general contractor and owner. A bond is not insurance for you: the surety expects to be repaid by the company and usually by its owners under an indemnity agreement. A seller's personal indemnity generally survives a sale, and a new owner usually signs a new one for new bonds. See the surety bond versus liability insurance comparison and surety bonds.

What if your biggest builder sends a new insurance clause?

A hypothetical example. A month after closing, the homebuilder that supplies a large share of the revenue sends a new subcontract. It asks for additional insured status for ongoing and completed work, primary and noncontributory wording, a waiver of subrogation and a higher umbrella. The deadline is two weeks.

Compare each clause with the endorsement schedule on your general liability, auto and workers' comp policies.
Ask the broker which items are already on the policy, which can be added and what each would change in premium.
Ask counsel about any hold-harmless or indemnity language.
Decide whether the account is worth the added cost, using the loss-of-customer risk you flagged in diligence.
Issue certificates only for cover that is in force, and keep the endorsements as well.

After closing, expect builders and landlords to ask for new certificates that name your company. A certificate shows what was in force on the day it was issued and confers no rights, so issue one only for cover the carrier has bound. See certificates the seller issued and certificate tracking in the first month. The sibling guide, coverage gaps new flooring owners find, covers the policy side of the same wording.

Keep reading

Frequently asked questions

Do flooring companies need a contractor license?

It depends on the state and sometimes the city or county. California licenses flooring as its own classification, Washington registers installers and requires a bond and liability insurance, Massachusetts registers residential contractors, and Florida's statute does not name flooring. Check each state and local authority.

Will the seller's contractor license transfer to me?

It may not. A license can belong to the seller's entity or depend on a qualifier who is leaving, and in California a sole owner license cannot be sold or transferred, with narrow exceptions. Ask the state licensing board what a change of owner or entity requires, and confirm bonds and workers' comp proof in your name.

My builder wants to be added to my policy as an additional insured. Do I have to say yes?

Not automatically. It is a contract term the builder, general contractor or property manager may include, and the wording and amounts come from the contract. Whether you must agree depends on your contract and your state's law, so ask your attorney. Read each one and ask your broker whether the policy already meets it or what adding it would change.

Do I need a performance bond for flooring work?

Only if a customer or owner requires one. It depends on the project. A bond promises performance to the owner, and the surety expects the company and usually its owners to repay any loss.

What if my California license qualifier leaves after closing?

The company may be unable to keep its license in force. In California the license belongs to the business entity and the qualifier is tied to it, and changes must be reported within 90 days. Ask the Contractors State License Board what replacing a qualifier requires, and settle your plan for it before closing.

References

Just bought a business? Get your insurance reviewed.

Send Morrow the declarations pages, loss runs and key contracts you inherited. Morrow can review them against the business you bought, flag gaps and request quotes where it makes sense. Any new terms depend on carrier underwriting.

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This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.

Contracts, Licenses and Bonds for a Flooring Company