Starting a profitable construction company requires that you meet certain legal standards. Most aspiring construction companies are surprised to learn that a number of surety bonds are required in order for them to begin conducting business.
Here are three types of surety bonds that you will need to qualify for in order to start your own construction company in the future.
1. Contractor License Bond
General contractor license bonds are designed to ensure that construction companies adhere to certain ethical standards. Depending on the language written in the bond, contractors are required to make ethical business decisions when it comes to dealing with the general public.
Should an unethical business decision be made, a member of the public can file a claim against the bond. Having a comprehensive contractor license bond gives you financial protection above and beyond your general insurance policies.
2. Bid Bond
A bid bond serves as reassurance for a client that you have the ability to take on a project and see it through to completion according to the standards you set forth in your bid. Bidding out construction projects is the best way to secure business, and having a bid bond in place can give potential customers the peace of mind that they need to award a construction project to your company.
Should it turn out that you don't have the ability to complete the project according to your bid, a customer can file a claim against the bid bond to seek financial compensation for the inconvenience.
3. Performance Bond
When you take on a construction project, your customer assumes that you have the knowledge and skill required to complete the project so that it complies with any applicable building codes. The customer also assumes that you will treat the construction site with respect and take every precaution possible to avoid damaging the property while you are working on a construction project.
A performance bond protects these assumptions by giving the customer the ability to seek financial redress in the event you fail to perform as expected. Having a performance bond in place can make your construction company more appealing to potential customers by letting them know that you take the quality of your performance seriously.
Taking the time to secure some surety bonds before you attempt to complete any construction projects will ensure that your new company is able to enjoy success in the future. To learn more, contact a company like NFP, P & C, Inc.