How to Start a Construction Business in California: Get Licensed First

In California, a construction business starts with a contractor license from the Contractors State License Board (CSLB). A city business license does not replace it. One detail changes the order of everything else: CSLB issues the license to a business, not just to you. The license belongs to a sole owner, partnership, corporation or LLC, and it cannot be moved to another business later. So you choose the business form first.

The order, step by step

1. Choose your business form. Sole owner, partnership, corporation or LLC. Who decides: you, ideally with an accountant.
2. Register an LLC or corporation with the Secretary of State. A sole owner skips this step. Who: California Secretary of State.
3. Apply for your contractor license. Pick the classification that matches your work, show 4 years of experience (yours or your qualifier's), apply, and pass the exams. Who: CSLB.
4. Get bonded and insured. A contractor bond, workers' compensation or an exemption, and for an LLC an extra bond and liability insurance. CSLB issues the license after it has these. Who: a surety company and an insurer.
5. Register the business locally. A city or county business license, an EIN from the IRS if you need one, and EDD registration when you start paying wages. Who: your city, the IRS, EDD.
6. Set up your contracts and permits. Before the first job. Who: you; permits come from your city or county.
7. Keep it all current. Renew the license, the bond and the insurance on time.

Choose your business form

CSLB licenses individuals (sole owners), partnerships, corporations, LLCs and joint ventures. The form you choose decides what you register before you apply and what you pay to get the license.

Corporations, LLCs and limited partnerships must stay in good standing with the Secretary of State. An LLC must also file its Statement of Information before CSLB issues the license.

"S corporation" is a tax election, not a separate business form for CSLB. Taxes and personal liability are questions for an accountant or a lawyer. This guide covers only what CSLB requires.

Contractor license vs business license

People often mix these up. You usually need both.

Each city sets its own rules. Los Angeles requires all contractors and subcontractors to get a Business Tax Registration Certificate. San Diego requires a Business Tax Certificate for every business in the city. To see what your city requires, search your city on CalGold, the state's permit finder.

Get your contractor license

This is the longest step, and the one most people underestimate.

• Pick the right classification. Not every construction business needs a Class B. Electricians need a C‑10, plumbers a C‑36, and so on. See CSLB's list of classifications and, for general building, our Class B license guide.
• Show your experience. The qualifier, you or someone else, needs 4 years of experience in the last 10 years as a journeyman, foreman, supervisor or contractor. Related education or an apprenticeship can count for part of it.
• Apply and pass the exams. Most applicants take a trade exam and the Law & Business exam. The Law & Business exam covers the business side: company organization, hiring and payroll, insurance and contracts.

CSLB's free guide Get Licensed to Build walks through the full path.

Bond and insurance before the license is issued

You do not need a bond or insurance to apply. You need them before CSLB issues the license.

• Contractor bond: $25,000, from a surety company licensed in California.
• Qualifier bond: if an RME qualifies your license, CSLB also requires a bond of qualifying individual. A corporation or LLC needs one too when its qualifier owns less than 10% of it.
• Workers' compensation: if you have employees, you must carry it. With no employees, you can file an exemption instead. Some classes must carry it even without employees: C‑8, C‑20, C‑22, C‑39 and C‑61/D-49. From January 1, 2028, every active license will need it, with or without employees.
• LLC only: an extra worker bond, required even with no employees, and liability insurance. The insurance amount grows with the number of people listed on the license, not with your workers:

Requirement	Amount	Source
LLC worker bond, in addition to the contractor bond	$100,000	CSLB: Limited Liability Company (LLC) Licenses
LLC liability insurance, up to 5 people listed on the license	$1 million	CSLB: Limited Liability Company (LLC) Licenses
LLC liability insurance added for each listed person over 5	$100,000	CSLB: Limited Liability Company (LLC) Licenses
LLC liability insurance, maximum required	$5 million	CSLB: Limited Liability Company (LLC) Licenses

• Requirement

  LLC worker bond, in addition to the contractor bond

  Amount

  $100,000

  Source

  CSLB: Limited Liability Company (LLC) Licenses

• Requirement

  LLC liability insurance, up to 5 people listed on the license

  Amount

  $1 million

  Source

  CSLB: Limited Liability Company (LLC) Licenses

• Requirement

  LLC liability insurance added for each listed person over 5

  Amount

  $100,000

  Source

  CSLB: Limited Liability Company (LLC) Licenses

• Requirement

  LLC liability insurance, maximum required

  Amount

  $5 million

  Source

  CSLB: Limited Liability Company (LLC) Licenses

Bond and insurance prices depend on your credit, your trade and the insurer, so we do not list them here.

Register the business locally

Do each of these when it applies to you. Most come after the license is issued:

• City or county business license. See the section above.
• EIN. It is free from the IRS. You need one to hire employees or to run a partnership or corporation.
• EDD. Register as an employer within 15 days once you pay more than $100 in wages in a calendar quarter. See EDD employer registration.
• Business name. If you use a business name other than your own name, file a fictitious business name with your county and follow its rules. CSLB allows one business name per license, and the name on your bond must match CSLB's records.
• Seller's permit. You need one if you sell fixtures, materials or equipment, even as part of a construction contract. Many contractors who supply and install fixtures need one. See CDTFA Regulation 1521.

While you wait for your license

Without a license, you can take a job only if the whole job is under $1,000 for labor, materials and everything else, is minor work that needs no building permit, and you do it without employees. The job can't be part of a bigger project, and you can't split a bigger job into smaller contracts. If you advertise, the ad must say that you are not licensed. See CSLB's bulletin on the minor work exemption.

Before your first contract

• Home improvement contracts. If the price is over $500, the contract must be in writing and include what California law requires. Give the customer a copy signed by both of you before work starts. The down payment can be no more than $1,000 or 10 percent of the contract price, whichever is less.
• Building permits. Before each job, check with the city or county building department whether it needs a permit, and get it before work starts.
• Public works. To bid on or work on public jobs, including as a subcontractor, register with the Department of Industrial Relations first. Only very small projects are exempt; see DIR's FAQ.

What it costs to start

These are CSLB's standard fees for a license in one classification. Exam and fingerprinting fees are paid separately to the testing company and the fingerprint operator. Bond and insurance premiums, city taxes, tools and vehicles come on top and vary too much to list.

Fee	Amount	Source
CSLB application fee (original license, one classification)	$450	CSLB: List of All Fees
CSLB initial license fee, sole owner	$200	CSLB: List of All Fees
CSLB initial license fee, partnership, corporation or LLC	$350	CSLB: List of All Fees

• Fee

  CSLB application fee (original license, one classification)

  Amount

  $450

  Source

  CSLB: List of All Fees

• Fee

  CSLB initial license fee, sole owner

  Amount

  $200

  Source

  CSLB: List of All Fees

• Fee

  CSLB initial license fee, partnership, corporation or LLC

  Amount

  $350

  Source

  CSLB: List of All Fees

Frequently asked questions

Do contractors need a business license in California?

Usually yes, in addition to the CSLB contractor license. The city license comes from the city where you do business, and each city has its own rules. The contractor license comes from CSLB and is the same across the state.

Can I start a construction business without a contractor license?

Only for minor jobs: the whole job must be under $1,000, need no building permit and be done without employees. For anything else, you need a CSLB license before you bid.

Can I start a construction business without experience?

Yes, if someone with the required experience qualifies your license. Their role must fit your business form: for example, a sole owner without the experience needs an RME. You still choose the business form and apply under your company's name.

Should my contractor license be under an LLC?

That depends on your taxes and how you want to separate business and personal risk, which is a question for an accountant or a lawyer. On the CSLB side, an LLC needs the extra worker bond and liability insurance and pays the non-sole-owner license fee. Decide before you apply, because the license cannot be moved to another business later.

Next steps

• Class B general building contractor license: if you plan to run a general building company
• Free Law & Business practice test: the exam on the business side of contracting
• How we keep your study material current