Your 2022 Comprehensive Guide to the California LLC Employee/Worker Bond
Contractors in California typically have to be licensed and bonded; however, there are numerous surety bonds within the construction industry. We recently discussed the $15,000 contractor license bond here. But, in this article, we are going to cover everything you need to know about the California LLC Employee/Worker Bond.
If your contracting business is (or will be) organized as a Limited Liability Company (LLC), you’ll need a California LLC Employee/Worker Bond—sometimes called a CA or a CSLB LLC Bond. In this guide, we will explain what the LLC Wage Bond is, how it works, and why you might need one for your California contractor business. We will also discuss some of the common misconceptions about employee/worker bonds and offer some guidance on how to get your contractor license.
What is a California LLC Employee/Worker Bond and do I need one?
A California LLC Employee/Worker Bond is a type of surety bond required specifically for contractors working in California and operating as a Limited Liability Company. The Contractors State License Board (CSLB) requires all LLC contractors to have this bond if they wish to obtain or renew their contractor license. The bond is in place to protect employees of the LLC from non-payment of wages, interest on wages, and fringe benefits.
Surety bonds are essentially three-party contractual agreements between the following:
- The principal: the party that needs the bond, in this case, a California contractor operating as an LLC.
- The obligee: the entity that requires the bond (the CSLB).
- The surety: the company that issues and guarantees the bond.
The California CSLB LLC Bond is only a licensing requirement for contractors in California who are or will be operating as an LLC. If you want to become licensed as a contractor in California but will not be registered as an LLC, this bond does not apply to you.
How much does this bond cost?
As a part of the application process to get your CA LLC Wage Bond, surety companies require a credit check. Fortunately, this will be a soft credit check that will not harm your overall credit score.
The good news is that (typically) you will not have to pay the entire $100,000 bond amount upfront. Instead, you will have an annual premium for your surety bond. The amount of this premium is determined by the surety, based on your company’s business financials and the managing member’s credit and personal financial information. As an ideal applicant with great credit and strong financials, your bond premium could be as low as $1,000 per year. You can learn more and apply for this bond here.
What is the purpose of the California LLC Employee/Worker Bond?
The California $100,000 LLC Wage Bond is designed to protect the employees or workers of your business from a loss of wages, benefits, or other financial obligations. For example, if your LLC contracting business fails to pay an employee for their work or contributions, that employee can file a claim against your LLC Wage Bond to receive compensation. The surety will investigate the claim and, if the claim is valid, reimburse that employee (the claimant) for damages up to the bond amount of $100,000. The bonded LLC is financially responsible for reimbursing the surety for all valid claims that get paid out, plus additional fees and expenses incurred.
Do I still need the $15,000 Contractor License Bond if I get the LLC Wage Bond?
Yes! The CSLB requires contractors operating as an LLC in California to have both the $15,000 Contractor License Bond and the $100,000 CSLB LLC Bond.
The $15,000 Contractor License Bond is a separate bond with a different purpose. This bond protects consumers from financial loss if a contractor fails to complete a project or does not follow through with the terms of their contract. Because the contractor license bond only protects consumers (e.g., a homeowner), the CSLB requires it in addition to the $100,000 LLC Employee/Worker Bond.
Unlike the LLC bond, which is only a requirement for some, the $15,000 Contractor License Bond is a requirement for all contractors applying to the CSLB for their contractor license. If you have questions about becoming a licensed contractor, check out our comprehensive step-by-step instructions on how to get a California contractor license.
Get your CSLB LLC Bond
At this point, we have covered everything you should need to know about the California LLC Employee/Worker Bond. South Coast Surety can help you get bonded quickly and easily. Our friendly surety experts are available to address any questions or concerns you may have. Either apply online or give us a call today at (949) 361-1692.
- In California, anyone with a contracting business registered as an LLC is required to have two different types of surety bonds: a $15,000 Contractor License Bond and a $100,000 LLC Employee/Worker Bond (also called a CA LLC Wage Bond or a CSLB LLC Bond).
- The CA LLC Wage Bond is designed to protect your employees or workers from a loss of wages, benefits, or other financial obligations.
- To get your LLC bond, a soft credit check is required. Applicants with a strong financial standing and great credit could pay an annual premium starting around $1,000.
- To qualify for a contractor license and operate as an LLC in California, you must first meet the basic licensing requirements, submit an application and required fees, pass an exam, and obtain both a California Contractor License Bond and an LLC Employee/Worker Bond.
- You can apply for your California LLC Employee/Worker Bond online at SouthCoastSurety.com.