Painting Company Licenses, Bonds and Contracts

Customers often write specific insurance endorsements into painting contracts, there is no national painting license, and bonds matter only on some jobs. So after closing, the work is matching each customer contract, each state or city license and your loan terms to the policies you inherited. This guide is for the entrepreneurship through acquisition (ETA) buyer or search fund CEO who inherited a stack of customer agreements, a license file and certificates. It describes how things generally work, so confirm the specifics with your construction attorney and the licensing authority.

The short answer

Customer contracts commonly ask for additional insured status, completed operations wording, primary and noncontributory terms, waivers of subrogation and indemnity, each added by a specific endorsement.
A certificate of insurance is information only. It does not prove the endorsement a contract requires exists.
Licensing is a state and sometimes local matter. Some states license painting, some register it and some do not list it, so check every state the company works in.
Whether a license, registration, bond or federal lead-safe firm certification survives a sale depends on the deal structure, the issuer and state law. Confirm each in writing.
A bond is not insurance for the painter. The surety expects to be repaid.

What insurance clauses do painting customers put in contracts?

Homeowners, landlords, property managers, general contractors and commercial owners all sign painting contracts, and the customer type decides which clauses appear. Customers set their own limits, and no standard figure applies to every painter, so read each contract for its numbers. The clauses below are the ones to match against the policy.

Common customer contract insurance clauses and what to check
Clause	What it asks for	What to check in your policy
Additional insured, ongoing operations	The customer is added to your general liability for claims arising from your work in progress	The endorsement exists and names the right party or uses blanket wording
Additional insured, completed operations	The same status for claims that arise after the work is finished	Usually a separate completed operations endorsement, not only an ongoing operations one
Primary and noncontributory	Your policy pays first and does not ask the customer's policy to share	The wording is endorsed, because the base form usually does not do it
Waiver of subrogation	Your insurer gives up the right to recover from the customer after paying a claim	A matching endorsement, and whether it also reaches workers' comp
Indemnity (hold harmless)	You take on some of the customer's liability	Whether the contract, and any state anti-indemnity law, limits it
Evidence of insurance (certificate) and notice	A certificate delivered before work starts and at renewal	The certificate matches the policy, and renewals are tracked
Workers' comp evidence	A certificate showing coverage for your crews and, often, subcontractors	Active coverage for every state where the crew works
Lead-safe paperwork	The customer or property manager expects pamphlet acknowledgments and records for pre-1978 homes	Your lead-safe firm certification and 3 year job files are in order
Protection of neighboring property, weather and warranty	Overspray, protection of cars and landscaping, rework and warranty terms	Who bears each, and what the policy does and does not cover

A certificate shows who the insured is, the policy period and headline limits. It does not show which endorsements exist, and a certificate holder is not the same as an additional insured. Ask your broker to send the endorsement pages that support each contract requirement.

State law changes the picture. Texas (Insurance Code chapter 151) and California (Civil Code section 2782) each limit how much liability a customer or general contractor can push onto a subcontractor, with exceptions, and they differ. Other states vary. See additional insured, waiver and primary and noncontributory for new owners and checking customer contracts against your policies. Our library pages on primary and noncontributory and why a certificate is not coverage explain the terms.

Do I need a license to paint, and who decides?

There is no national painting contractor license. The Bureau of Labor Statistics says no formal credential is typically required to be a painter, and licensing of the business is a state and sometimes local matter. Four states show how much it varies.

State examples of painting contractor licensing
State	What to know	What to verify
California	The state licenses painting and decorating as its own classification. A license is required above a dollar threshold set in the licensing statute or for work that needs a building permit, a $25,000 contractor license bond is required, and the Contractors State License Board suspends a license when workers' comp coverage lapses	The current threshold (check it with the board) and the qualifying individual
Washington	Painting is among the specialty trades that must register with the state Department of Labor and Industries. A continuous surety bond of $15,000 is required for a specialty contractor, and working without registration is a gross misdemeanor	The current liability insurance minimum, which the registration rules set and which you should confirm with the Department of Labor and Industries
Florida	Florida's contractor licensing statute lists no painting category, and specialty categories depend on board rules	The board rules and any local business tax receipt a county or city requires
Massachusetts	Residential contracts over $1,000 must be in writing and state the contractor's registration number (G.L. c. 142A)	Ask the state consumer affairs office whether painting work needs a home improvement registration, and check the state's pre-1978 lead rules

The closest thing to a national credential is the Environmental Protection Agency (EPA) lead-safe certification for firms working in pre-1978 housing. The firm certification lasts five years, must be renewed before it expires and must be amended within 90 days of a change in the information in the application. Some states also license lead paint removal separately. Ask your attorney which state and city rules apply to your jobs. Our primer on licenses, permits and registrations when buying a business covers the wider process.

What happens to licenses and certifications at a sale?

It depends on the deal, the issuer and state law, so do not assume either way. Three examples show the questions to ask.

California. The licensing statute provides for corporation, LLC and partnership licenses to be canceled on dissolution or merger and does not provide for transfer, so a buyer that purchases assets into a new company generally needs its own license. If you buy the licensed company itself, the question becomes what must be reported, such as officers or the qualifying individual (the person whose exam and experience back the license). Confirm the structure with the board and your construction attorney.
Any state that licenses painters. Find out who qualifies the license and what happens if that person leaves. Ask the board whether a replacement can be named and how quickly.
Washington. Registration and the bond are held by the registered contractor. Ask the Department of Labor and Industries whether they move in a sale.

EPA's rule does not say whether the firm certification moves with a sale. It does require the firm to amend its certification within 90 days of a change and to stop work until amended. Get an answer in writing from EPA or the authorized state program for your deal structure, and ask your attorney. Whatever the answer, a certified firm must keep records for three years after each renovation, so ask to see the files. See when the seller holds the contractor license and buying a business in a licensed trade.

Which bonds does a painting contractor need?

Some painting contractors need no bonds at all. A license bond is needed only where the state requires one, such as $25,000 in California or $15,000 for a Washington specialty contractor. Some customers ask for more. A surety bond is a three-party promise, not insurance for the painter. If the surety pays, it expects the painter to repay it. Bonds come in two groups:

License or registration bonds, required by a state licensing rule. Washington's $15,000 specialty contractor bond and California's $25,000 contractor license bond are examples.
Contract bonds, meaning bid, performance and payment bonds, which public agencies and some commercial owners ask for on larger jobs.

Whether your company has any bonded work is a diligence question. The Small Business Administration (SBA) runs a surety bond program for small contractors who cannot get bonds in the standard market, in which SBA backs the surety, and surety producers are the specialists who place them. See do surety and license bonds transfer and our library pages on surety bonds and surety bond vs liability insurance.

What do leases and lenders add?

A shop, warehouse or yard lease commonly has its own insurance clause, and a landlord may ask to be named as an additional insured and to receive a waiver of subrogation. It may also address storage of flammable liquids. Lenders add property insurance on collateral. Under Small Business Administration rules, a 7(a) loan over $50,000 generally requires hazard insurance on pledged collateral, subject to limited exceptions in SBA's rules, with a lender's loss payable clause on equipment such as sprayers and vans. If the business is a franchise, the franchise disclosure document (FDD) states the franchisee's insurance obligations. See SBA lender insurance requirements and lease insurance requirements for new owners.

What does a mismatched contract look like in practice?

A hypothetical example. One property management company accounts for 40 percent of a painting contractor's revenue under no long-term contract. Weeks after closing, it asks for completed operations additional insured status and primary and noncontributory wording. The inherited policy has an ongoing operations endorsement only.

The questions are the ones in the table above. Which forms are needed? Will the carrier change them, and at what cost? Who bears any gap in the meantime? Does the contract contain change-of-control or anti-assignment language that the sale triggers? And how does a lender or an investor read a customer that large? A buyer who has read the key contracts against the policy before closing can answer these in an afternoon. Morrow can read your key contracts against the policy endorsements and flag mismatches before a customer asks.

What should I put on my contract and license checklist?

List every state and city where the company works, and its license, registration or local receipt in each.
Identify who qualifies each license and what happens if that person leaves.
Ask for the EPA firm certification, expiry date, certified renovator roster and job records.
Pull the key contracts and mark every insurance, indemnity and assignment clause.
Compare each clause to the endorsements in the full policy, not to the certificate.
List all bonds, who issued them and what they secure.
Read the lease and loan documents for insurance clauses.
Set a certificate tracking process for the first month. See certificate tracking in your first month.

Our guides on coverage gaps for painting contractors and insurance after you buy a painting contractor cover the policy side.

Keep reading

Frequently asked questions

Do I need a license to run a painting company?

It depends on the state and sometimes the city. There is no national painting license. California licenses painting as its own classification and Washington requires painting contractors to register, while Florida's statute lists no painting category. Check each state and city where the company works.

Does the painting company license transfer when I buy it?

It depends on the state, the issuer and your deal structure, so do not assume either way. In California, licenses of corporations, LLCs and partnerships are canceled on dissolution or merger, so a buyer that purchases assets into a new company generally needs its own license. Ask the licensing board and your construction attorney how your structure is treated.

Does the EPA lead-safe certification survive a sale?

EPA's rule does not say, so get it in writing. It requires a firm to amend its certification within 90 days of a change in its application information. Ask EPA or the authorized state program for a written answer for your deal structure.

Can a customer end my contract because I bought the company?

It depends on the contract. Look for change-of-control and anti-assignment language, which a sale may trigger, and ask your construction attorney how your deal structure is treated.

Do I need surety bonds for my painting company?

Some do. License or registration bonds are a state requirement where they apply, and public agencies and some commercial owners ask for bid, performance and payment bonds. A bond is not insurance for the painter, because the surety expects to be repaid.

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 Painting Contractor