The Contractor's License-An important credential that should be in place for renovations, repairs, and new construction

Many states use licensing as a means to regulate an activity, particularly one that requires a high level of skill and is deemed dangerous when performed incorrectly. Professionals are often licensed because unqualified practitioners can cause harm. A state may require the licensing of professionals in law, finance, real estate, construction, and other occupations.

Contractor licensing, if required by the state, can help you gauge competency. So before you hire a contractor to remodel or build your home, it is important to verify his or her professional licensing. This is very important because the term "licensed, bonded, and insured" is used loosely in the construction industry. There are many kinds of licenses and often a single professional will have several licenses, each with a specific purpose. The following will help clarify the difference between two well-known contractor licenses: a business license and a professional license.

Business licenses versus professional licenses

A business license is often mistaken for a professional license. The difference between them is this: A business license pertains to a business while a professional license pertains to an individual.

Business license: It's all business

A business license allows a company to engage in business because it meets Federal, State, County and City requirements for that occupation. To obtain a license, the company must register with the government taxing authorities. Whereas the business license allows the company to engage in business, it does not necessarily certify that the individual is licensed to perform a trade as required by the State.

Professional licensing: It's personal

Because professional licensing is typically required of people who can cause harm through the malpractice and misconduct of their trade, construction tradesmen are often licensed. But not every construction trade within the construction industry requires professional licensing. Some States only require that electricians, plumbers, and mechanical (heat and air conditioning) contractors are licensed, while other State may require the licensing of numerous construction trades. Every state has unique licensing laws.

Verifying professional licensing

Many people think that simply obtaining a copy of a contractor's license is sufficient evidence of licensure. But because forgeries do exist, it is best to verify a contractor's license with your Building Department or your State Division of Professional Licensing.

Many State licensing websites have a license database that is easily accessed by the internet. Simply enter in the contractor's name and if a record exists, the license number, the type of license, and other details will be displayed. In addition, the website may include the names of those who have been disciplined by the State Division of Licensing. To reach your state's licensing website, enter search words such as "State of Florida Professional License." Include the words "State of" to help ensure you reach a government website and not a commercial website.

Licensing protects you.

Many States use professional licensing as a means to ensure that practitioners are competent and ethical before they practice their profession. But the State can only do so much to protect you from unlicensed and unqualified practitioners. If you want to ensure that a contractor meets your state's requirements for contractor licensing, research your state website for a list of licensed trades and then confirm that the contractor has a current license. With a competent contractor on board, your remodel or new home project is more likely to be successful.