In California, there are specific steps you must follow to become a licensed contractor. Among these steps is the purchase of a California Bond of Qualifying Individual (BQI). California is one of several states that require certain contractors to have a qualifying individual bond. This type of bond is required for individuals with a controlling interest in a business entity licensed to perform residential or commercial construction work in California.

However, not every California contractor needs a Bond of Qualifying Individual. Below, we will explain what a qualifying individual bond is, who needs one, and how the bond works.

What is a California Qualifying Individual Bond?

Getting a California Bond of Qualifying Individual, often referred to as a BQI, is an important part of the process for obtaining a contractor’s license in California. A BQI acts as a financial assurance that the licensed contractor will follow all applicable licensing laws and will complete their work in accordance with all required standards. This bond acts as a safeguard for consumers, providing them with a way to hold a contractor accountable for their actions and recover damages if a licensed contractor causes injury.

The Bond of Qualifying Individual (BQI) is required by the California Contractors State License Board (CSLB). It is one of three surety bonds that may be required as part of the contractor licensing process in CA, the other two of which are the $25,000 Contractor License Bond and the $100,000 LLC Employee/Wage Bond. 

The CSLB is responsible for setting the requirements and standards that contractors must meet in order to obtain a construction contractor license in the state. In this case, individuals applying for a contractor's license are required to obtain a Qualifying Individual Bond if the contractor license is qualified by a Responsible Managing Employee (RME) or a Responsible Managing Officer (RMO) who owns less than 10% of the voting shares of the company

According to the definition outlined by the CSLB, a qualifying individual (or qualifier) is "the person listed on the CSLB records who meets the experience and examination requirements for the license." In other words, the qualifying individual for a contractor's license in California is "responsible for the employer's (or principal's) construction operations." This individual will ultimately be liable for any damage or loss caused as a result of the work done by the company.

Please note that the company will still need to post a General Contractor License Bond (CLB) in addition to the Bond of Qualifying Individual. And that the principal for the CLB bond will also be responsible for damages or losses caused by the work done by the company.

Who is Required to Have a Qualifying Individual Bond in California?

In general, any contractor planning to work in the construction industry in California, and listed as the qualifying individual on their contractor's license, will need a Bond of Qualifying Individual. This includes builders, carpenters, plumbers, electricians, roofers, and more.

However, the specific person who needs to apply for a BQI depends on who is designated as a qualifying individual on your business license. For example:

• If you are applying for an individual license, you are often the qualifying individual and must purchase a bond for yourself. However, you can also designate a Responsible Managing Employee (RME) with the necessary education and experience as the qualifier, who would then be required to obtain a BQI.

• If you have a partnership license, the qualifying individual may be one of the general partners or an RME.

• For a corporate license, the qualifying individual may be one of the officers listed on the license (known as the Responsible Managing Officer, or RMO), or an RME. An RMO is a person who has direct supervision and control of their employer's construction operations, as defined by California law.

• If you have a limited liability company license, your qualifying individual may be one of the officers, members, or managers listed on your license, or an RME.

The California Business and Professions Code Section 7071.9 states that anyone listed as a Responsible Managing Employee (RME) must be a full-time employee of the firm; full-time is defined as a minimum of 32 hours per week. In addition, a qualifying individual cannot be listed on any other active license. In most cases, an RME is someone who has qualified for that position by providing proof of their expertise to the CSLB.

If you are still unsure whether or not this type of bond is required for your particular business or trade, you may contact your local licensing board for assistance.

How Much Does a BQI Cost?

The BQI bond amount required by the CSLB is $25,000. To purchase this bond, you typically pay an annual premium. Your bond premium is primarily determined by your personal credit score–via a soft credit check. 

Generally, the higher your credit score, the lower your bond cost. If you have a strong history of responsibly managing financial obligations, you may qualify for a lower premium. With excellent credit, the annual cost of your bond could be as low as 1 - 3% of the $25,000 bond amount.

For an exact quote and to apply for your contractor's bond online, visit us at SouthCoastSurety.com.

How Does a Bond of Qualifying Individual Work? 

A BQI is a type of surety bond that ensures California contractors will abide by all applicable laws and regulations related to having a qualifying individual associated with a business’s contractor license. 

There are three parties involved in any surety bond:

• the principal, or qualifying individual who purchases the bond;
• the surety, or the company that provides the bond; and
• the obligee, which requires the bond; in this case the California State Licensing Board (CSLB).

If you fail to comply with the terms of your contract or perform work in violation of state regulations, you may be liable for any losses that result from these actions. If a valid claim is made against your bond, the surety company will compensate the claimant up to the bond amount (after an investigation into the claim’s validity). You will be required to reimburse the surety company for anything paid out on your behalf, plus additional fees and expenses incurred.

In order to purchase a Bond of Qualifying Individual, you must undergo a soft credit check and meet certain eligibility requirements. Overall, obtaining any required surety bonds is a vital part of the licensing process for contractors in California and helps to ensure that you will always operate within state regulations.

How to Become a Licensed Contractor in California

Purchasing a surety bond (or multiple) is just one step in becoming a licensed contractor in California. The full process to obtain your contractor's license includes the following steps. To qualify, you must:

1. Meet the requirements for the license, including documented experience.

2. Pass a knowledge exam with acceptable scores.

3. Determine your license classification. You can find more information about license classifications on the CSLB website. 

4. Purchase all required surety bond(s). These may include:

      - A $25,000 Contractor’s License Bond‍

      - A $100,000 LLC Employee/Wage Bond (for businesses operating as a Limited Liability Company)

      - A $25,000 California Bond of Qualifying Individual, if applicable

5. Submit an Application for an Original Contractor License and pay the appropriate fees. 

6. File your bond(s) with the CSLB within 90 days.

You can find a more in-depth guide to getting a California contractor’s license here.

Ready To Get Started?

If you're ready to become a licensed contractor in the state of California, you'll want to make sure that you have purchased the required surety bonds you'll need to get your license approved.

The easiest way to get started is to apply for your bond(s) online at SouthCoastSurety.com! You can find more information about these bonds on our website, as well as tips for getting started on your application process. If you have any questions, please contact apps@southcoastsurety.com or call 1-800-361-1720.

Key Takeaways

• A California Qualifying Individual Bond is sometimes required when applying for a contractor’s license in California.
• A Bond of Qualifying Individual is required when the contractor license is qualified by a Responsible Managing Employee (RME) or a Responsible Managing Officer (RMO) who owns less than 10% of the voting shares of the company.
• The California BQI is required by the California Contractors State License Board (CSLB).
• A qualifying individual may be an owner, partner, managing member, or managing employee.
• The required bond amount is $25,000 and requires a soft credit check to purchase. Applicants with excellent credit could pay an annual premium as low as 1 - 3% of the bond amount.

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