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License and Permit Bonds

What is a License Bond?

A license bond is a bond that is required by certain governmental entities, such as a municipality, which allows someone to engage in a specified activity (as you can see below – there are a lot of types of these bonds). The person seeking the bond is needing this permit bond to perform the activity and the bond ensures that the party wanting the bond will comply with the rules and regulations of the municipality. The person seeking the bond is known as the Obligor and the governmental entity is the Obligee.

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License & Permit Bond

In many states, a license & permit bond is actually required before you can do any work.  For example, a roofer in Texas will need a license & permit bond before starting any jobs.  This is different from many other states where a license & permit bond is not required.

License and Permit Surety Bond Types

A concessionaire bond is a type of surety bond required for businesses that operate concessions, such as food stands or retail shops, typically within larger facilities like airports, stadiums, or parks. This bond ensures that the concessionaire adheres to the terms of their contract, including paying rent and following regulations. If the concessionaire fails to meet their obligations, the bond provides financial compensation to the facility owner or governing body.

A concessionaire bond is a type of surety bond required for businesses that operate concessions, such as food stands or retail shops.

An Athletic Agent Bond is a surety bond required for individuals or entities acting as agents for professional athletes. This bond ensures that the agent complies with state regulations and ethical standards, protecting athletes from fraudulent or unethical practices. If the agent violates the terms of the bond, it provides financial compensation to the athlete or other harmed parties. This bond provides that the sports agent will act according to the rules and abide by the terms of the agency contract (that is, they will not take any additional funds above and beyond those found in the agency agreement).  

An Athletic Agent Bond is a surety bond required for individuals or entities acting as agents for professional athletes.

An FHA Bond (Federal Housing Authority) is a type of surety bond required for mortgage brokers and lenders participating in FHA loan programs. This bond ensures that these professionals adhere to FHA regulations and ethical standards, protecting borrowers from fraud and misconduct. If a broker or lender violates these standards, the bond provides financial compensation to affected parties.

An FHA Bond (Federal Housing Authority) is a type of surety bond required for mortgage brokers and lenders participating in FHA loan programs.

A Freight Broker Bond, also known as a BMC-84 bond, is a surety bond required by the Federal Motor Carrier Safety Administration (FMCSA) for freight brokers and freight forwarders. This bond ensures that the broker adheres to industry regulations and fulfills their contractual obligations, such as paying carriers and shippers for services rendered. If the broker fails to meet these obligations, the bond provides financial compensation to the affected parties, protecting them from financial loss.

A Freight Broker Bond, also known as a BMC-84 bond, is required by the Federal Motor Carrier Safety Administration (FMCSA) for freight brokers and freight forwarders.

A Cemetery Licensee Bond is a surety bond required for businesses or individuals operating a cemetery to ensure compliance with state regulations and ethical standards. This bond protects consumers from fraudulent practices, financial mismanagement, or failure to properly maintain the cemetery. If the cemetery operator violates these obligations, the bond provides financial compensation to affected parties, ensuring their interests are safeguarded.

A Cemetery Licensee Bond is a surety bond required for businesses or individuals operating a cemetery to ensure compliance with state regulations.

A Collection Agency Bond is a surety bond required for collection agencies to ensure they operate in compliance with state laws and ethical standards. This bond protects consumers and creditors from fraudulent or abusive practices by the agency, such as mishandling funds or violating debt collection regulations. If the collection agency fails to meet its obligations, the bond provides financial compensation to the affected parties.

A Collection Agency Bond is a surety bond required for collection agencies to ensure they operate in compliance with state laws and ethical standards.

A Cigarette Tax Bond is a type of surety bond required for businesses involved in the manufacturing, distribution, or retailing of cigarettes. This bond guarantees that the business will pay all required taxes on cigarette sales to the government. If the business fails to pay these taxes, the bond provides financial compensation to cover the unpaid amounts.

A Cigarette Tax Bond is a type of surety bond required for businesses involved in the manufacturing, distribution, or retailing of cigarettes.

A Private Eye/Detective Agency Bond is a surety bond required for private investigators and detective agencies to operate legally. This bond ensures that the agency adheres to state regulations and ethical standards, providing protection to clients against fraudulent or unethical practices. If the agency violates these terms, the bond offers financial compensation to affected clients.

A Private Eye/Detective Agency Bond ensures that the agency adheres to state regulations and ethical standards, providing protection to clients against fraudulent or unethical practices.

A Dealer Motor Vehicle Bond is a surety bond required for car dealerships to ensure compliance with state laws and ethical business practices. This bond protects customers and the state from fraudulent activities, such as misrepresentation of vehicle conditions or failure to pay taxes and fees. If the dealership violates these obligations, the bond provides financial compensation to the harmed parties.

A Dealer Motor Vehicle Bond is a surety bond required for car dealerships to ensure compliance with state laws and ethical business practices.

A City Ordinance Compliance Bond is a surety bond required for businesses or individuals to ensure adherence to local city ordinances and regulations. This bond guarantees that the bonded party will comply with all relevant laws, codes, and requirements set forth by the city. If the bonded party fails to meet these obligations, the bond provides financial compensation to the city or affected parties for any resulting damages or non-compliance issues.

A City Ordinance Compliance Bond is a surety bond required for businesses or individuals to ensure adherence to local city ordinances and regulations.

An Administrator Bond is a surety bond required for individuals appointed as administrators of estates, ensuring they fulfill their fiduciary duties responsibly and in compliance with legal requirements. This bond protects beneficiaries and creditors from potential mismanagement or fraud by the administrator. If the administrator fails to perform their duties correctly, the bond provides financial compensation to the affected parties.

An Administrator Bond (probate bond) is required for administrators of estates, ensuring they fulfill their fiduciary duties responsibly and in compliance with legal requirements.

A bond protecting against a defective title, often called a Title Bond or Defective Title Bond, is a surety bond that guarantees the holder of a vehicle or property title against claims or defects not discovered during the initial title search. This bond is typically used when there are issues with proving ownership or when the original title is lost, stolen, or has errors. If a claim arises due to a defect in the title, the bond provides financial compensation to cover any losses or legal issues related to the defect.

A Title Bond or Defective Title Bond, guarantees the holder of a vehicle or property title against claims or defects not discovered during the initial title search.

 

A Health/Fitness Club Bond is a surety bond required for gyms and fitness centers to protect members and the state from financial loss due to the club's failure to meet contractual obligations. This bond ensures that the club adheres to state regulations, such as honoring membership agreements and providing refunds if the club closes. If the club fails to comply, the bond offers financial compensation to affected members.

A Health/Fitness Club Bond is required for gyms and fitness centers to protect members and the state from financial loss due to the club's failure to meet contractual obligations.

An Employment Agency Surety Bond is a surety bond required for employment agencies to operate legally, ensuring they comply with state regulations and ethical standards. This bond protects job seekers and employers from fraudulent practices or contract breaches by the agency. If the agency fails to meet its obligations, the bond provides financial compensation to the affected parties.

An Employment Agency Surety Bond is required for employment agencies and ensures they comply with state regulations and ethical standards.

 A Fidelity Bond is a type of surety bond that protects a business from losses caused by dishonest or fraudulent actions committed by its employees. This bond serves as a safeguard against theft, embezzlement, or other forms of financial misconduct within the company. If an employee engages in such activities, the fidelity bond provides financial compensation to the business to cover the resulting losses.

A Fiduciary Relationship Bond, also known as a Fiduciary Bond, is a surety bond required for individuals appointed to manage the assets or interests of others, such as executors, trustees, or guardians. This bond ensures that the fiduciary will act in the best interest of the beneficiaries and adhere to legal and ethical standards. If the fiduciary fails to fulfill their duties responsibly or engages in misconduct, the bond provides financial compensation to the affected parties for any resulting losses. A Home Seller (Dealer) Bond, specifically for a Mobile Home Dealer, is a surety bond required for businesses that sell mobile homes to ensure compliance with state regulations and ethical business practices. This bond protects buyers from fraud, misrepresentation, or failure to deliver the mobile home as agreed. If the dealer violates these obligations, the bond provides financial compensation to the affected buyers or state authorities. A Home Improvement Repair Professional Bond is a surety bond required for contractors and businesses engaged in home improvement and repair services. This bond ensures that the contractor complies with state regulations and fulfills their contractual obligations to clients, protecting homeowners from substandard work or unethical practices. If the contractor fails to meet these standards, the bond provides financial compensation to the affected homeowners for any losses incurred.

Fuel Tax Bond

This bond is needed by fuel sellers. Also known as an IFTA bond, it helps provide assurance that taxes will be paid by the fuel seller.

Types of License and Permit Bonds

Home Seller (Dealer) Bond (Mobile Home Dealer).

Mobile home sellers have a requirement for a dealer bond. This bond protects against dishonest sellers. These bonds protects consumers from misrepresentation, fraud and other perceived bad dealings in the mobile home market.

A Contractor's License Bond is a surety bond required for contractors to obtain a license and legally perform construction work. This bond ensures that contractors comply with state regulations, building codes, and contractual obligations, protecting clients from substandard work or financial loss. If the contractor violates these terms, the bond provides financial compensation to the affected clients or parties. A Hunting & Fishing License Bond is a surety bond required for businesses or individuals selling hunting and fishing licenses to ensure compliance with state regulations. This bond guarantees that the seller will accurately report and remit collected fees to the appropriate state authorities. If the seller fails to do so, the bond provides financial compensation to cover the unpaid amounts. A Tax Preparation Bond is a surety bond required for tax preparers to ensure they comply with state laws and ethical standards in their professional conduct. This bond protects clients and the state from fraudulent or negligent practices by the tax preparer, such as errors in tax filings or misappropriation of funds. If the tax preparer fails to meet their obligations, the bond provides financial compensation to the affected parties.A Pre-need Funeral Sales and Service Bond is a surety bond required for businesses that sell pre-need funeral plans, which allow individuals to arrange and pay for their funeral services in advance. This bond ensures that the business will manage and use the pre-paid funds ethically and in accordance with state regulations. If the business mismanages the funds or fails to provide the promised services, the bond provides financial compensation to the affected clients or their beneficiaries. A Public Official Fidelity Bond is a surety bond that protects against losses caused by dishonest or fraudulent acts committed by public officials while in office. This bond ensures that officials perform their duties ethically and in compliance with the law, safeguarding public funds and assets. If a public official engages in misconduct, the bond provides financial compensation to cover any resulting losses or damages to the government or public. A Sales and Use Tax Bond is a surety bond required for businesses that collect sales and use taxes, ensuring they comply with state tax regulations and remit the collected taxes to the appropriate authorities. This bond protects the government from financial loss if the business fails to pay the required taxes. If the business defaults on its tax obligations, the bond provides financial compensation to cover the unpaid taxes.

Insurance Broker – Surety Bond

Some states require that insurance brokers become bonded. These bonds protect consumers against misrepresentation and broker problems that they have no insight into.

Dealer Motor Vehicle Bond

A motor vehicle dealer bond is required for most states for those that want to sell vehicles. Especially necessary in the used car market, these bonds protect both consumers against fraud as well as the state to make sure that proper regulations are followed.

Payday Lending Bond

Payday lending has been increasingly within the spotlight in recent years. Given the increased scrutiny and negative public perception, bonds are now being required by most areas. These bonds are for those that want to get into the payday lending area and are needed prior to issuing a license to set up a payday lending operation.

Pest Eradication Bond

Pest control companies are now seeing a requirement for bonds. These bonds protect consumers to make sure that the pest control company has the proper permits, especially with the handling and disposal of the harmful chemicals that can be used.

Plumbing Business Bond

Some states require plumbers to get a bond prior to being licensed. These plumber business bonds are needed to protect consumers from fraudulent home repair/installation practitioners.

Plumbers bond - getting a plumbing bond, or plumber license bond - picture of bathroom for plumbing work

Pre-need Funeral Sales and Service Bond

A pre-need funeral bond is required by certain states (like North Dakota) prior to issuing a state license.

Private Detective (Investigator) Bond (for a personal license)

This is similar to the one required for an entire agency. Single agents also need a bond for their personal license. This is a great example of a fidelity bond. 

private investigator bond - private eye bond or detective bond - picture of Private Eye

 

Public Official Fidelity Bond

Public officials may be required to put up a bond to make sure that they uphold their duties in good faith. These are especially used for public officials that have access to funds or other private information, such as the county clerk. These are some of the oldest types of bonds that have been issued. In the 1800's, these were standard in many public offices and were usually granted by another individual.

Roofers Bond

Roofing companies, in some states, are required to obtain a bond prior to getting a home improvement/installation license.

Sales and Use Tax Bond

This bond is required by your local state government for business that are involved in retail sales, or that rent goods or leases. The bond protects the government and makes sure that it will received its taxes by the retail business.

 

A Roofers Bond is a surety bond required for roofing contractors to legally operate, ensuring they adhere to state regulations and professional standards. This bond protects clients from substandard work, incomplete projects, or financial loss due to the contractor's actions. If the roofer fails to fulfill their contractual obligations, the bond provides financial compensation to the affected clients. A License Bond for Signs and Advertising is a surety bond required for businesses involved in creating and installing signs and advertising materials to ensure compliance with local regulations. This bond protects clients and the municipality from potential damages, incomplete projects, or violations of advertising laws. If the business fails to meet these obligations, the bond provides financial compensation to cover any resulting losses or damages. A Small Business Loan Bond is a surety bond required for businesses receiving loans to guarantee repayment and proper use of the loan funds. This bond ensures that the borrower adheres to the terms of the loan agreement, protecting the lender from financial loss due to default or misuse of funds. If the business fails to meet these obligations, the bond provides financial compensation to the lender.

A Surplus Insurance Lines Broker Sales Bond is a surety bond required for brokers who sell surplus lines insurance, which covers risks not typically insured by standard carriers. This bond ensures that the broker adheres to state regulations and ethical standards, protecting clients and the state from fraudulent or unethical practices. If the broker fails to comply with these obligations, the bond provides financial compensation to affected parties for any resulting losses. A warranty is a guarantee provided by a manufacturer or seller that a product or service will meet certain quality and performance standards over a specified period. It assures the buyer that any defects or issues will be repaired or replaced at no additional cost within the warranty period. Warranties can cover various aspects, such as parts, labor, and sometimes even the overall functionality of the product. A Wholesale Distribution of Fuel (non-retail) Bond is a surety bond required for businesses engaged in the wholesale distribution of fuel to ensure compliance with state and federal regulations. This bond guarantees that the distributor will adhere to laws, pay taxes, and fulfill contractual obligations. If the distributor fails to meet these requirements, the bond provides financial compensation to the affected parties, such as the government or business partners. 

 

Tax Preparation Bond.

ax preparers, like H&R Block or Liberty Tax, have to become bonded. Most states require these bonds now, which is an outgrowth of the tax fraud cases of several years ago (not against H&R Block, though) where tax preparers were filing returns that they knew were improper.

Tax preparer bond or tax preparation bond - Tax preparer - guy holding sign

A Transportation Bond is a surety bond required for businesses involved in transporting goods or passengers to ensure compliance with federal, state, and local regulations. This bond protects clients and the public from financial loss or damages due to the transportation company's failure to fulfill its contractual obligations or regulatory requirements. If the company fails to comply, the bond provides financial compensation to the affected parties. A Real Estate Title Bond is a surety bond that protects against potential defects or claims in a property's title, ensuring clear ownership transfer during real estate transactions. This bond provides financial protection to buyers and lenders in case undisclosed issues, such as liens or ownership disputes, arise after the sale. If a title defect is discovered, the bond compensates the affected parties for their financial losses. A Utility Deposit Bond is a surety bond required by utility companies to guarantee payment of utility bills by customers, such as businesses or individuals, who may not have established credit. This bond serves as an alternative to a cash deposit, ensuring that the utility provider will receive payment even if the customer defaults. If the customer fails to pay their utility bills, the bond provides financial compensation to the utility company.

Warranty

(Product or Otherwise) Bond. A warranty bond makes sure that a contractor performs work according to the owners' satisfaction. It further provides assurance that the work being done meets all applicable codes and other statutory requirements.

Wholesale Distribution of Fuel (non-retail) Bond

Wholesale distributors are required to put up a bond to make sure that all applicable laws are being followed and that taxes are being withheld and paid properly.

Permit and License Bond

License and permit bond are in huge contrast to most types of contract bonds or other types of bonds that might be required by the federal government, municipal governments or the state government. These bonds are required if any business wants to keep their commercial license to continue operating in the state. They will need to provide assurances that their business is financially secure and that it protects the safeguards set for the public's safety, morals, welfare and health. Even though most of these bonds are only able to cover up to the limit explicitly state on penal sums, it will also provide the business with coverage for taxing authorities, suppliers and laborers. You must then purchase additional forms of coverage through liability policies for commercial use. Since bonds are not considered to be a type of insurance contract, you will need to understand that it will not cover property damage or third party injuries that result from any type of negligence from the contractors.

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License Bond

A license bond is similar to a license and permit bond only it's limited in what is required. For most purposes, you can consider this the same thing as a license and permit bond, as it's really a requirement to doing business within the state.

What is a License and Permit Bond?

As we mention above, a License and Permit Bond is something that is required by a governmental entity to ensure that the business is abiding by all required laws.  It protects the consumer and, in many cases, protects the government.

What is the Cost of a License & Permit Bond

The cost varies considerably depending on the type of bond.  Many bonds only cost one percent (1%) of the total bond amount. So, for a $20,000 bond, the cost would be $200.  For other bonds, the cost runs as high as 15%.

Permit Bond (aka License Surety Bond)

A permit bond is a surety bond that provides protection for a permit business. Typically used in commercial projects, the bond provides protection for business that the government requires to get a permit, such as a building permit. A License Surety Bond is really just another name for a license bond, or license and permit bond.

What is a Contractor's License Bond? Do you Need a License and Permit Bond?

It's a surety bond for a contractor to get a license in a certain area. Governments require the Principal (the contractor) to get a bond to protect the Obligee (the government) through a third party (the surety). And yes. In many places it is required before working in that area.

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