You must have a license to do construction work in Tennessee.
Tennessee Contractor License
A Contractors License must be obtained before operating.
There are 8 steps when it comes to obtaining your Tennessee license.
Obtaining Your License: Eight Steps
Step One: Who Can Take The Exam?
Individuals who will be the Qualifying Agent for any entity that is obtaining the license will take the exam on behalf of a business. The individual can be a full-time employee, officer, or owner. The qa will need to register with PSI in order to complete the examination. There are several PSI testing centers around, as well as in Tennessee and other states. Walk-ins will not be allowed. You will be required to schedule an appointment prior. However, exams are usually offered each day. The scores will be given when you complete your exam, that way you will know when you pass. The person who is taking the Business and Law exam will not need to also take the trade examination. More than just one person is able to take the exams for one company.
PSI Examination Services is known as the official testing agency for the Tennessee exam. The website iswww.psiexams.com. You can reach them by phone at 1-800-733-9267 FREE. Each test will be given on a weekly basis in Nashvile, Memphis, Knoxville, Johnson City, Jackson, and Chattanooga, but you will need to make an appointment. Each test score that is passed will be valid for three years from the original date that was passed. It’s a requirement to provide proof of having insurance, general liability, and worker’s compensation. This must have $100,000 minimum coverage.
Which Exams Are Mandated?
There are two exams:
- Trade Exams, which is for several license classifications. Price: $55
- Business and Law. Price: $55
Below is the list for Contractor Trade Exams that are offered, as well as combined exams. (mechanical, electrical, and building)
- Licensed Masonry Contractor (LMC) – Projects that total $100,000 or more.
- Fire Sprinkler (CMC-D)
- HVAC (CMC-C)
- Plumbing (CMC-A)- Will need to have pre-approval
- Full mechanical, plumbing & HVAC (CMC) Will require pre-approval.
- Electrical (CE)
- Com/Ind (BC-B,C)
- Res/SmCom (BC-A,b(sm) Projects that are $750,000 or less
- Res/Com/Ind (BC)
- Industrial (BC-C)
- Commercial (BC-B)
- Residential (BC-A)
Examples for trade exams needed for classifications:
- Build residential houses only, take the BC-A exam.
- Construction Manager is required to take the full BC exam.
- Residential, commercial and industrial building, take the BC exam. (NOTE: Do not take the BC exam unless you can show experience on your application or may be limited to specific class.)
- Build homes and commercial projects, (such as a doctor’s office, less than $750,000), need the BC-A and BC- b(sm) exams OR may take the combined BC-A,b(sm).
- Commercial building in excess of $750,000, BC-B exam.
- A BC-B or BC is needed to build a water/sewer plants or to get a MU classification.
- Communication/cell towers; no trade exam.
Step Two: Financial Statement
Who will need to prepare the financial statement?
The law has a requirement that audited or reviewed financial statement, and it will need to be prepared by a license independent film.
You will need to contact a Licensed Public Accountant or a Certified Public Accountant who is currently licensed, in order to prepare an audited or reviewed financial statement. They will need to be license within the state where the business operates. In the state of Tennessee, you will need to check the Tennessee board of Accountancy to perform the license search in order for verification for properly licensed as individually and a firm, to perform a review or audit.
Financial Statement: Which Are Required?
The CPA will need to prepare a current financial statement with the following:
- **Reviewed opinion ( This is required for a monetary limit of $1,500,000 or less)
- ***Audited opinion (required for a monetary limit exceeding $1,500,000); and based on
- Generally Accepted Accounting Principles (GAAP).
- *Current is considered less than 12 months
During renewal time, a review is not required. It may supply an in-house financial statement or be compiled.
***At renewal time, an “Audit” would not be required and a “Reviewed” would be acceptable
At the time of renewal, an audit will not need to be required. A reviewed will be acceptable.
Financial Statements General Information
- Compiled financial statements will not be acceptable for the entity of obtaining a new license.
- It will not be acceptable for financial statements prepared on an income tax basis.
- Contractor licenses are issued only according to the legal name that appears on the financial statement, as well as the name should match on all of the related information, such as the Grauranty agreement, contractor affidavit, line of credit, articles or organization, and charter. Also, the contractor can only operate in the name as they were licensed. If the entity obtaining a license is a subsidiary, there will need to be an in-house statement that may be supplied with the parent’s guaranty agreement and audit.
- Guaranty Agreement is required with a cash only financial statement, and when it’s not an operating statement.. The Guaranty will need to include a personal financial statement from the owner(s) or the parent company that would be guarantying the entity.
- The Board can require a Guaranty with personal financial statements if the working capital is mainly accounts receivable.
*A Bond in the Board’s format that can be supplied in lieu of the Guaranty Agreement, within the amount of $500,000 or $1,000,000 for an Unlimited monetary limits.
Financial statement: Why is it Needed?
Each contractor will be assigned to a monetary limit with their license for the size of the project that they will need to bid or contract. The limit will need to cover the project’s total, and it will not be split into smaller contracts or phases to circumvent the law. The entire contract will need to include profit, labor, and materials. If a residential contractor is building a home on the consumer’s land, the land will not be part of the contract. If the contractor is not building on the land of the consumer, it will be part of the total cost of the contract, and can’t be split between two contracts as one for land and the other for the home. There will be no limit when it comes to the amount of single projects that are ongoing. The contractor who has a $200,000 limit will need to construct many of the homes, only if it does not go over the limit. Contractors who have 10% tolerance means they will have a BC-A/r classification, which means residential restricted limited license.
Determination of Monetary Limit
- will need to let the accountant know of the size of the license you are seeking.
If you plan on contracting homes of $150,000 or less per each contract, you will need your CPA to determine if your financial statement will need to meet your criteria.
- Monetary limits are based ten times the lesser of working capital, as well as the net worth. This includes experience.
- In order to obtain a license with a limit of $150,000, an individual would be required to show working capital, as well as net worth of at least $15,000and as experience for this amount.
- Since the entire limit is based upon the lesser of the two, a contractor with a working capital of $10,000 and a net worth of $200,000 would be able to qualify monetarily for a $100,000 limit.
- The contractor would be able to supplement their reviewed for an audited financial statement with a Line of Credit in the amount of $5,000. This is to increase working capital.
- You could also submit a parent or personal company financial statement with a Guaranty Agreement.
- A contractor, as well as the required audit or review can prepare a personal supplemental financial statement.
- The Board has the right to limit the monetary license due to prior experience. It is important to list all experience of officers and owners.
- The Board might not use the entire amount of the working capital has mostly uncollected accounts receivable.
There may be a bond in the Board’s format that can be supplied with a guaranty agreement within the amount of $500,000 or $1,000,000 for a monetary limit that is unlimited. During renewal time, the guaranty agreement or the bon will need to be removed in order to make the request to the Board, as well as provide an updated financial statement and being able to meet the requirements, in order to replace it.
License Limit: Unlimited
To hold an unlimited monetary limit for a license, the contractor will need to have $300,000 in net worth and in working capital, as well as experience with audited financial statements. During renewal time, the contractor will need to supply a reviewed financial statement for unlimited.
Net Worth and Working Capital
It is important to as your CPA/LPA to help determine an amount for your net worth and working capital to make sure you will qualify for the requested limit. You will need to consider the experience and if the majority will be receivables that are uncollected. The working capital will be of current assets, minus the current liabilities. The same is for net worth.
The total dollar amount for each project or individual contract is what the monetary limit is. Each contractor won’t be able to split a contract into separate phases in order to work within the limit. There will be a 10% tolerance allowed. Each contract who has a $150,000 monetary limit has the chance to contract up to $165,000 and not be given a violation. There will be no limit when it comes to how many projects each contract can perform. However, this is as long as the project hasn’t been split into separate phased to circumvent the law.
Line of Credit
The line of credit will need to appear as the same name that is on the financial statement. It must be the same format to be acceptable.
Step Three: Proof of Insurance and Letters of Reference
Letter of Reference
Submit the “Letter of Reference” from the application and have it completed by a past client or employer who may comment about your construction work/experience OR a code official who has inspected your work. Only one reference letter is necessary.
You will need to send in the letter of reference from the application and then make sure it is completed by an employer or past client who can comment about your construction and work experience. Even a code official who previously inspected your work can do this. You will only need one reference letter.
Proof of insurance
General Liability is required based upon the contractor’s monetary limit. Workers’ Compensation insurance is required or will have to supply proof of exemption.
Step Four: Limited Liability Companies, Corporations, etc.
- Each Tennessee corporation will need to send in a copy of their Charter and proof that shows they already registered with the Tennessee Secretary of State Office.
- The Out-of-state corporations will need to register as a foreign corporation, as well as send in a copy of the charter. They will also need to attach a copy of a certificate of authority to prove that have registered the charter.
- The Limited Liability Companies (LLC) will need to send in a copy of Articles of Organization, as well as proof to show that they have filed and registered with the Tennessee Secretary of State, which will include out of state entities.
- The limited partnerships will need to register with the Secretary of State.
- The exemption registry for worker’s compensation as a construction services provider will require further registration with a separate section of Secretary of State Office.
Name on License
It is important to make sure the entity is submitted with the same name that is on the financial statement. The contractor license will be issued with the legal name and the mode of operation that is on the financial statement. Contracts and bidding will need to have the same name as well.
DBA (Doing Business As)
If you have an entity that has a FBA name, you will need to include it on your certificate that you get form the Secretary of State, as well as the financial statement, which is on the form. If the entity has a specific name, it must be on all documents the same way.
Step Five: Complete, Sign, and Notarize
You will need to finish the affidavit, experience, and synopsis pages for the Contractor’s License Application. You will need to ensure that each question on the application is complete. If you do happen to feel certain questions don’t apply, you will need to write an explanation and don’t leave anything at all blank. It is important to list all experience you have with other companies, officers, and owners.
List all of the information for any other licenses, including second or additional licenses. Also, if you were ever a qualifying officer or agent that is listed on a license, it is important to list it. Put down any disclosure of complaints, judgements, or felonies. Not disclosing may delay your license issuance due to providing false information.
You will need to ensure that the affidavit is notarized and signed by each individual, such as the owner, partner, major stockholder, main officers, members, and qualifying agent. Each block will need to be check. Be sure to include any explanation where needed. If you have convictions, complaints, or big where your license is required, you may be required to have an interview with the board. Your license may be denied for giving false information.
Step Six: Send in an Application, Attached With $250 Fee
When the application is finished and submitted and attached with a non-refundable application fee of $250, make sure you send it to the following:
Tennessee Board for Licensing Contractors
If you send out your application through regular U.S Postal services, you will need to allow 5-7 business days from our receipt. The overnight mail will take two days from the receipt from the mail room. I will be in your best interest to send the mail certified mail or express, that way you can track it due to sensitive information. Be sure to make a copy to keep for your records. There will be a letter that will notify you for your receipt. They are usually on the website within one week. You will need to type in “license search” on the “application in process” page to be able to confirm delivery.
The application will be due by each month on the 20th, and before the Board meets. This application will need to be received within the office before or by the deadline, and not the postmarked date.
Do NOT contract, bid or offer to engage before obtaining the license! Doing so could prevent being awarded the contract and license held for six (6) months. See T.C.A. 62-6-120.
You should give processing three week for your application before calling the phone number. There is limited staff so there may be a delay in getting back to you. You will be notified via email, mail, or fax.
Step Seven: Board Review
There will be an interview that is possibly required with a Board member for the schedule meeting. If you wish to not attend the interview, you may be able to waive the interview.
Individuals who hold a restricted residential (BC-A/r) will need to interview. Those who do not have enough evidence will not be able to provide on the application (three years). Individuals who have complaints or felony convictions will not be waived. Those applications will receive a letter in the mail letting them know when the required interview is.
– STEP 8- LICENSE ISSUED
The staff will process the license in order to be issued after the approval by the Board meeting. There will be a license mailed to you, and it will have the expiration date, classification, and ID number on it. It will also include your monetary limit. You may need to check the license issuance status, which you can do by doing a license search.
The license will be issued to you for two years. The renewals will be sent you by mail 90 days before your expiration date ad 30 days before experiation.
Each contractor has the opportunity to apply for a license revision for changes. You can change the mode of operation remove or add qualifying agents, add classifications, increase the licensed monetary limits, or even retire their license.
You can review the state’s website for further updates and changing laws.
Timeframe For The Course
- You can expect at least 8 hours for the Tennessee Contractor Licensure Exam.
- You can expect 24-30 hours for your NASCLA Accredited Commercial Contractor Course.
Is the NASCLA Accredited Commercial Contractor exam accepted in Tennessee? NASCLA Commercial Contractor Exam: Is This Accredited License Accepted in The State of Tennessee?
Yes, it is.
When passing the NASCLA Accredited Exam for the Commercial General Building Contractors, you will be listed on the NASCLA National Exam Database. Then you will have the information available for the below states that will accept the NASCLA Accredited Exam:
Contractor Continued Education: Does Tennessee Require It?
General Contractor, Commercial Contractor License: Does The State of Tennessee Require It?
A contractor license in Tennessee is needed before any offering or bidding takes place for any projects that total $25,000 or more, which includes labor and materials. Reciprocal agreements will not allow you to use a different state license within Tennessee.
Is the NASCLA Accredited Commercial Contractor license accepted in Tennessee? NASCLA Commercial Contractor License: Does Tennessee Accept This Accredited License?
When you pass the NASCLA Accredited Exam for the Commercial General Building Contractors, you will find yourself listed within the NASCLA database. There will be information available on which states will accept the NASCLA Accredited Exam. They are as follows:
- North Carolina
- South Carolina
BC-A – RESIDENTIAL CONTRACTOR
# of Questions % Required to Pass Time Allowed
100 73% (73 items) 300 minutes
Subject Area # of Items
Site work, Footings, and Foundation 10
Concrete and Concrete Reinforcement 10
Estimating, Plan Reading,
and Gen Residential Code Requirements 20
Associated Trades 15
OSHA Safety 8
BC-B – COMMERCIAL CONTRACTOR
# of Questions % Required to Pass Time Allowed
100 73% (73 items) 300 minutes
Subject Area # of Items
Site work, Footings, and Foundation 10
Concrete and Concrete Reinforcement 15
OSHA Safety 6
General Code, Plan Reading, and Estimating 27
Associated Trades 10