What is a License Bond?

A license bond is one of several different types of commercial bonds needed for a business to engage in certain types of business practices. Bonds of this type may be required before a local municipality or a state or federal agency will grant the license necessary to legally engage in those who are business. The idea behind this type of bond is to ensure that the person or company that issued the license understands and will comply with all standards, laws, regulations and rules applicable to any kind of business covered under that license.

 

Liscense bond as form of bail bond or performance bond

Liscense bond as form of bail bond or performance bond

The license bond is often considered as a form of bail bond or performance bond, as the instrument acts as a pledge or commitment from the part of the recipient to comply with any legal requirements necessary to obtain the type of business license required to provide services within this community. Basically, the bond has a guarantee of compliance, which helps ensure the body that gives the desired license that the business owner knows and understands what needs to be done to operate within the law. License license revocation can take place if the business owner deliberately violates one of these rules, opening the door to losing the license given by the local agency.

 

How to understand license bond function

license bond function

One of the easiest ways to understand how a license bond functions is to consider an electrician who wants to offer his services to residential customers in a particular community. As part of the process of applying for a business license, the electrician will also obtain a license bond. The bond is that the agency is asked to question business licenses and serves as evidence that electricians understand local standards and regulations and are prepared to comply with them. In some jurisdictions not getting a license bond means that the chances of receiving the business license are slim to none.

 

Companies

Companies

Companies of all types may be required to obtain licenses, bonds that relate to their specific areas. Along with electricians, professionals such as general contractors, construction professionals and plumbers are also likely to need a license bond as part of the process of receiving and maintaining a business license. In some areas, local authorities can provide stakeholders with instructions on how to secure a license bond, and outline the process and qualifications required to obtain a business license.