Garage Door Company Licenses and Bonds After a Sale

Do not assume the license, the bond or the customer insurance terms come with the company. Each rests on a person, a legal entity or a signed contract, and each has to be checked in your name. What happens to each in a sale depends on whether you bought the company's stock or its assets. There is no national license for garage door installers, so the rules depend on your state and sometimes your city or county. This guide is for owners who want to know what to confirm before taking jobs under the company's name, and how to compare builder and property manager requirements with the policies they inherited.

The short answer

Licensing is by state and sometimes by locality. Some states license this work as a specialty and others may not license it at the state level, so check your own state and county.
A bond is not insurance for you. A bond protects the customer or agency, and the surety expects to be repaid if it pays a claim.
A license often rests on one qualifying person, and asset deals differ from stock deals. In California, for example, a license generally does not move to the buyer in an asset purchase, and other states may differ, so ask your licensing board. In a stock purchase the license generally stays with the company, but it may depend on a qualifier who is leaving, so decide who holds it before closing.
Customer contracts ask for specific endorsements. Additional insured status for ongoing and for completed work, primary and noncontributory wording and waivers of subrogation are each separate items, and a certificate is not the policy.

What licenses and bonds could stop me from taking jobs?

Licensing for garage door work is a patchwork. The table shows the kinds of requirements that can apply, what two states' published rules show as examples, and what to verify. It is not a list of what applies to you.

Licenses, permits and bonds that can apply, with what to verify
Item	What it is	What sources show	What to verify
State contractor license	Permission to contract for the work, often tied to a qualifying individual	California lists a limited specialty classification for doors, gates and activating devices (C-61/D-28). Whether a given garage door job needs it depends on the contract price, permits and the exact work, so confirm the classification with the board	Whether your state and county require a license for your work and which classification
Contractor registration	A state registration with bond and insurance conditions	Washington requires construction contractors to register with its Department of Labor and Industries, with a $30,000 bond for a general contractor and $15,000 for a specialty contractor, plus general liability insurance. The statute covers work on structures attached to real estate, so garage door installation likely falls within it	Registration status and renewal dates
License bond	A surety bond the licensing authority requires	California requires a $25,000 contractor license bond for an active license. An LLC licensee also faces additional bond and liability insurance rules, and a qualifier who is a responsible managing employee (a bona fide employee who qualifies the license), or an officer who owns less than 10 percent of a corporation's voting stock, may need a separate $25,000 bond	The bond amount, the surety and the renewal date
Permits and product approvals	Local rules for door replacement, wind-rated products or opener wiring	Some jurisdictions may require permits for door replacement or wind-rated products, and a Door and Access Systems Manufacturers Association (DASMA) standard exists for missile impact and wind pressure. Rules differ by county and city, so ask your building department which products and permits apply	Building department rules and any electrical license rule for wiring openers
Local business license	City or county registration	City and county rules differ and are separate from the state items above	Ask your city and county business license office whether a local license or permit applies to your work

Check the California board's and the Washington Department of Labor and Industries' current pages before relying on any figure above. The surety bonds page and the surety bond versus liability insurance comparison explain why a bond does not protect you the way insurance does.

Do the license and the bond come with the business?

It depends on the deal. In a stock purchase the company and its license generally stay together, though the license may rest on a qualifying individual who is leaving. In an asset purchase the buyer should plan on applying for its own license (California works that way; check your state). Check the rules in your state with the licensing board and your deal counsel.

What generally happens in each deal type
Item	Stock purchase	Asset purchase
License	Stays with the company, but may rest on a qualifier who is leaving	Buyer should plan to apply for its own (California works this way)
License bond	Stays with the company, and the surety may re-underwrite after the ownership change	A new license usually needs a new bond
Seller's indemnity to the surety	Generally stays with the seller or owners	Generally stays with the seller or owners
Insurance policies	Stay with the company, but the insurer must be told	The seller's cannot be taken over without the insurer's written consent

In California, for example, the statute on corporate and LLC licenses (Business and Professions Code section 7076) provides for cancellation on dissolution or merger and does not say a license can be assigned, so a successor generally applies for its own, and a license is qualified by an individual with the required knowledge and experience (section 7068). Confirm the deal structure with the board. An unlicensed contractor in California generally cannot sue to collect payment for work that required a license (section 7031). Other states vary, and some may not license the trade at all.

If the seller was the only qualifier, a buyer who closes without a plan may not legally take new jobs. In a Small Business Administration (SBA) 7(a) acquisition loan the seller generally may not stay on as an employee in an initial acquisition, though the business may hire the seller as a consultant for up to 24 months. The SBA's rulebook does not say whether a consultant can be the license qualifier. For every 7(a) loan the SBA also requires evidence of all required licenses within 90 days after the final disbursement.

A bond does not move on its own. If the seller or its owners signed an indemnity agreement with the surety, that personal indemnity generally stays with them after the sale, and the surety will look to the original indemnitors if a bonded job goes wrong. New owners typically sign a new indemnity agreement, and the agency or customer that requires the bond decides what paperwork it accepts, so ask your surety and deal counsel early.

What do customer contracts and leases ask of your insurance?

Builders, property managers, homeowner associations and commercial customers commonly attach insurance requirements to their agreements. There is no standard limit across the trade, so read each contract for itself. The items below are requested in different words but they are separate coverages.

Common contract insurance requests and what to check on the policy
Request	What it generally means	What to check on your policy
Additional insured, ongoing operations	The customer is added for claims connected to your work in progress, not for its own sole negligence, and it does not increase your limits (the wording depends on the endorsement edition, and older or other forms may differ)	The endorsement edition and whether it is blanket or scheduled
Additional insured, completed operations	A separate endorsement for claims after the job ends, which draws on the same completed work limit	That it stays on every renewal for as long as the contract requires
Primary and noncontributory	Your policy pays first and does not ask the customer's own policies to share	That the additional insured wording and the contract both support it
Waiver of subrogation	Your insurer gives up its right to recover from a named party	That a waiver was agreed in writing before the loss, and that auto, workers' comp and umbrella each have their own endorsement
Umbrella or excess limit	A higher liability limit above the underlying policies	Which policies it sits over and what it excludes
Indemnity (hold harmless)	You agree to cover the customer's liability to others arising from your work, to the extent the law allows (state anti-indemnity rules vary)	Whether an endorsement narrows what counts as an insured contract

A shop lease usually adds a similar list: liability coverage with the landlord as an additional insured, and sometimes property coverage on improvements. It usually also needs the landlord's consent to an assignment, so check that before closing. Some carriers charge extra for waivers or limit them. The additional insured, primary and noncontributory and waiver of subrogation glossary pages explain each term, and additional insured, waiver and primary wording for new owners covers them in the acquisition setting.

What if a builder's contract asks for more than your policies give?

A hypothetical example. A regional builder is the company's largest customer. Its subcontract requires additional insured status for both ongoing and completed operations, primary and noncontributory wording, a waiver of subrogation on general liability and workers' comp, and a $2 million umbrella. After closing, the new owner finds the policies carry ongoing operations additional insured status and a workers' comp waiver only, with a $1 million umbrella. The builder's portal rejects the certificate and payments are held. The limits are illustrative, and this guide gives no typical figure.

The fix is a sequence:

List every customer contract and mark its insurance exhibit.
Compare each item to the endorsements on the actual policies, not only to the certificate. A certificate of insurance is a summary, not the policy. See why a certificate is not coverage.
Ask the broker which items can be added and at what cost.
For items that cannot or should not be added, ask the customer to revise the requirement.
Set up tracking so renewals do not drop an endorsement. See certificate tracking in the first month.

A Morrow review can compare each contract's insurance exhibit with the endorsements on your policies.

How do deposits, cancellation rights and warranties fit in?

Customers who paid a deposit on a custom door expect delivery, and a buyer often ends up honoring those orders whether or not the purchase agreement requires it. California's home improvement contract rules can limit down payments, and the federal Cooling-Off Rule from the Federal Trade Commission (FTC) gives a three business day right to cancel for certain sales made at the buyer's home, with exceptions. Whether a given sale falls under either depends on the facts, so confirm your contract forms with counsel.

Before closing, ask three questions and get each answer in the purchase agreement:

Which deposits are open, and who funds the doors on order?
Which work orders are open, and who finishes them?
Which warranty callbacks are likely, and who pays for them?

Insurance matters here in a limited way: a refund owed to a customer is generally a business cost rather than an insured claim, and whether any policy responds to a lost deposit depends on the cause and the policy wording.

What about dealer agreements and your lender?

Some garage door companies sell through a manufacturer's dealer network. Dealer status, tier and warranty program are set by your dealer agreement and the manufacturer. Ask the manufacturer in writing before closing, and read the agreement for change of control terms and any insurance requirement. See buying a franchise resale if your company is a franchise.

Your lender sets its own terms. For 7(a) loans over $50,000, the SBA requires hazard insurance on pledged collateral, with narrow exceptions, and the lender is named on the policy. The rulebook does not set a minimum liability limit. The SBA also requires that all assets conveyed in the purchase, including any transferable licenses, be properly secured as collateral by the lender. A license is often tied to a person or entity and may not move in a sale (California's does not, as noted above), so that clause does not settle who holds your license. List lender conditions and the license plan on your closing checklist. See licenses, permits and registrations when buying a business and what insurance a new garage door company owner needs.

Keep reading

Frequently asked questions

Do I need a license to install garage doors?

It depends on your state, sometimes your city or county, and the size of the job. Some states license this trade as a specialty and others may not. Check your state licensing board and local building department.

Does the seller's contractor license transfer when I buy the company?

It depends on the deal. In California, an asset buyer generally has to get its own license, and other states differ. In a stock purchase the license generally stays with the company, though it may rest on a qualifier who leaves. Plan who will hold the license before closing.

Does a license bond protect my business?

No. A bond protects the customer or agency that requires it. If the surety pays a claim, it expects the principal, and often the owners, to repay it.

Is a certificate of insurance enough to satisfy a builder's contract?

Usually not on its own. A certificate summarizes the policy and does not change it. The contract's requirements need to be matched by endorsements on the policy.

Will the manufacturer keep my dealer status after the sale?

It depends on your dealer agreement and the manufacturer. Nothing says dealer status carries over automatically, so ask in writing 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 Garage Door Company