LLC Employee/Worker Bonds
What is an LLC employee/worker bond?
Contractors in California wishing to organize their business as an LLC (Limited Liability Company) must first post an LLC employee/worker bond. The bond amount required is $100,000. This requirement is in addition to the general California contractor license bond of $25,000.
An LLC employee/worker bond protects a contractor’s workers and employees if the contractor fails to pay wages, interest on wages, or fringe benefits. If the LLC is also a party to a collective bargaining agreement, the bond covers welfare fund contributions, apprentice program contributions, and pension fund contributions.
To read more about this specific bonding requirement, see California B&P Code Section 7071.6.5.
Get Your LLC Employee/Worker Bond:
Quick Takeaways
- Contractors in California wishing to organize their business as an LLC must first post an LLC employee/worker bond.
- This bond protects a contractor’s workers and employees if the contractor fails to pay wages, interest on wages, or fringe benefits.
- An LLC employee/worker bond guarantees the Contractors State License Board that bonded contractors will pay employees fairly and honestly – or face bonds claim up to $100,000.
How does an LLC employee/worker bond work?
LLC employee/worker bonds are three-party agreements between the following:
- Surety: The company that issues the bond
- Principal: The contractor
- Obligee: The Contractor State License Board requiring the bond
This surety bond guarantees the Contractors State License Board that the bonded contractor will pay employees fairly and honestly – or face a bond claim of up to $100,000. If a claim is filed against the bond, the surety company must investigate to determine the claim’s validity and then settle it if it’s legitimate. Then the surety will seek reimbursement from the contractor at fault for the claim.
How much does an LLC employee worker bond cost?
To get your bond, you’ll pay a premium, a small percentage of the bond limit ($100,000). Depending on your credit score, you could pay anywhere from 1-10% (on average) of the bond amount. For example, if your bond rate is 2%, you’d pay $2,000.
How to Get Your California Contractor Business Registration or License
Here’s a rundown of the list of requirements for successfully obtaining your California business license or registration:
- Proof of good standing with the California Secretary of State
- Active Registration Number
- Liability insurance
- Contractor license bond
- LLC employee/worker bond
- Personnel of Record
- LLC qualifying individual bond (if applicable)
- Disciplinary bond (if applicable)
See complete and detailed requirements on the CSLB website.
Frequently Asked Questions
Are these bonds high-risk?
LLC employee/worker surety bonds are riskier than contractor license bonds. Therefore, getting bonded can sometimes be more challenging if you have a low credit score. However, we can often issue bonds to those with low credit scores for higher premiums. Call us anytime to speak with an agent about your situation (888-435-4191). Our goal is to get you bonded in a zip!
Does my credit score matter?
Yes, your credit score plays a role in your ability to get bonded. Typically, the higher your credit score, the lower your premium rate will be. For example, if you have excellent credit, you might pay around 1% of the bond amount ($1,000). On the other hand, if you have a lower credit score, you could pay upwards of 5% ($5,000 or more) for the same bond.
How can I avoid claims against my bond?
To avoid bond claims, always pay employees the amount you owe them for their work, along with promised fringe benefits and other payments. Also, ensure you carefully read through your bond contract and employee contracts and understand the laws and regulations for your industry. Make all payments on time and document your expenses and agreements so you can prove your innocence if someone files a false claim against you.
What other surety bonds do I need to work as a contractor in California?
In addition to the $100,000 LLC employee/worker bond, contractors must also post a $25,000 contractor license bond to operate legally in California. Contractors may also need the following bonds:
- $25,000 bond of qualifying individual (if your license is qualified by a Responsible Managing Employee)
- $25,000 disciplinary bond (if your license must be reinstated or reissued after being revoked for violating a contractor license law)
In addition to posting surety bonds, California contractors with LLCs must also carry a $1 million general liability insurance policy while operating.
Get an LLC Employee/Worker Bond in California
ZipBonds is the fastest and most secure way to get the license and permit bonds you need. We take out the pain of long, complicated applications. Most of our bonds are approved and processed immediately. Call us at (888) 435-4191 or start the form online to get bonded ASAP.
About ZipBonds.com
Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”
Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.