Many professional individuals and companies must obtain a license or permit to do business in the state of California. This includes contractors, auto dealers, credit services organizations, employment agencies, janitorial services, and more. (While auctioneers are not required to be licensed by the state, they are required to maintain a $20,000 bond with California’s Secretary of State.)
Contractor license bonds are the most common license bond in California and are a prerequisite for obtaining a license from California’s Contractors License Board. In addition to contractor license bonds, there are several other types of contractor bonds that are important in California, including bid bonds, performance bonds, and payment bonds.
In California, most of these are required by municipalities rather than by the state. They guarantee that a contractor will abide by all applicable rules and regulations and protect against the loss of taxpayers’ money in the event that the contractor does not live up to the terms of the contract.
California courts may require a court bond for individuals serving as a minor’s legal guardian, managing the money of a person who has been declared incompetent, acting as executor of an estate, appealing a court’s decision, and other reasons. Some court bonds guarantee that people with fiduciary responsibilities carry out their duties honestly and ethically. Others ensure that plaintiffs or defendants pay whatever damages, fines, court costs, or legal fees the court holds them responsible for.
The party required to obtain a bond (the principal) pays a premium to a surety bond company (the surety). The party requiring the bond (the obligee) can file a claim against the bond if the principal does not act in accordance with the terms of the bond. If the claim is upheld, the surety pays the obligee and then works to recover the money from the principal.
The principal pays a premium that is a specific percentage of the total bond amount. The obligee determines that total bond amount, and the surety determines the percentage (typically 1% – 15%) based on an assessment of the principal’s creditworthiness and other factors. The greater the risk to the surety, the higher the percentage.
Ask for a quote today on the California bond you need.