The first question you probably want to answer is whether your business even needs a license. The short answer is “it depends,” and the lengthy explanation is much more detailed.
First, let’s take a look at Delaware’s definition of a contractor:
“‘Contractor’ includes every person engaged in the business of furnishing labor or both labor and materials in connection with all or any part of the construction, alteration, repairing, dismantling, or demolition of buildings, roads, bridges, viaducts, sewers, water, and gas mains, and every other type of structure as an improvement, alteration, or development of real property; a person is a contractor whether he is a general contractor or a subcontractor, or whether he is a resident or a non-resident.”
As you digest that, you’ll realize that the definition includes just about everyone. Does that mean that all contractors need licenses? No, but all contractors must register their business with the Delaware Division of Revenue.
Delaware contractor licensing rules state no explicit requirement for general contractors outside of registration, but certain municipalities might have their own rules. Also, keep in mind that some subs require trade licenses, which we’ll cover in a bit.
How to get a Delaware contractor license
Whether you’re required to obtain a license or simply register your business depends on the type of work you do. The following sections break down the required credentials, and how to go about getting them.
General contractor’s licenses
General contractors aren’t required to carry a state-issued license in Delaware, but they will have to register their business with the Division of Revenue. There are two types of registrations available: resident and non-resident.
The Division of Revenue attempts to make the registration process as straightforward as possible by supplying a Combined Registration Application (or CRA). While it does come as one packet, there are at least 35 sheets in both registration packages, covering everything from basic business registration to construction-specific documents and requirements.
Much of both the resident packet and non-resident packet is repetitive, and the requirements for registration are fairly straightforward. You’ll have to meet worker’s compensation and unemployment insurance requirements, and supply identifying information about your business structure. You’ll also have to provide tax information so the state can track your revenue. Non-residents have a hoop or two more to jump through, however.
As a non-resident, you’ll still have to register your business, but you’re also going to have to secure a surety bond. That bond must have a value of 6% of the total project cost.
But there is an exception: Non-residents completing contracts valued at less than $20,000 total annually still need to register, but this form serves instead of the bond.
The fees for licensing are $75 for both license types, but they’re prorated throughout the first year of application, and licenses expire each year.
|Jan. 100%||Feb. 92%||Mar. 83%||Apr. 75%||May 67%||June 58%||July 50%||Aug. 42%||Sept. 33%||Oct. 25%||Nov. 17%||Dec. 8%|
Subcontractors and specialty trade licenses
Subcontractors and specialty trades in the construction business must also register their business with the Division of Revenue. In addition, several contractor types have to carry special trade licenses. These trades include:
- Water drillers
- Pump installers
Electrical contractors in Delaware must employ a licensed Master Electrician. This license is a function of the Division of Professional Regulation. To qualify, the applicant must have six years of experience as a journey-level electrician under the supervision of a Master Electrician.
The application requires passing an examination which you can apply for through the DelPros website.
Delaware also requires plumbing contractors to employ a Master Plumber. The Division of Professional Regulation oversees these licenses as well. Applicants must have a total of seven years of work experience under a master licensee or a journeyman certificate and two years of work experience under a master licensee after receiving the certificate.
Successful licensing will require passing an examination for which you can register through the DelPros website.
HVAC contractors have similar requirements to plumbing contractors in order to operate in Delaware. They must employ a Master HVAC license holder, which requires registering and passing an examination through DelPros.
To qualify, applicants must have a journeyman-level certificate and two years of experience under a master licensee or seven years of experience working under the supervision of a master HVAC license holder.
Delaware contractor licensing requirements by municipality
Many of the local municipalities in Delaware have their own licensing requirements that contractors must meet. Some even have requirements for general contractors.
Dover might be the largest city by population in Delaware, but the licensing requirements are pretty laid back. Beyond the state’s requirements, all that Dover requires of contractors is to apply for a business license with the city. This will cost contractors a minimum of $125, or a rate of $00.00046 for aggregate receipts. For example, a business doing $2 million in revenue each year would have to pay $920.
Wilmington prefers registering contractors over licensing them, and it makes it relatively straightforward. Business license applicants will fill out this application for construction business, including:
- Air conditioning
- Boiler installation
- Construction management
- Electrician/electrical contractor
- Heating contractor
- Plumbing contractor
- Sign-billboard erectors
- Mechanical contractors
- Satellite television installer
- Asbestos abatement contractor
The application fee for all trades is $120, except for satellite television installation, which costs $301.
Middletown requires construction businesses performing work within the city limits to obtain a business license. While the website claims fees vary, this application states that contractors must pay $125 for licensing.
According to the City of Newark’s website, a business license is required for businesses operating within the city. The fees are based upon estimates of “the demand and cost for municipal services related to business activities in the city.”
Penalties for unlicensed contracting
While the registration packets might be long and full of information, the actual process of applying for registration with the Division of Revenue isn’t very difficult. Since registration is so accessible, Delaware sees no reason why a contractor wouldn’t comply. The fees they assign are significant.
Contractors who do not comply with the state’s licensing requirements are subject to civil penalties of up to $10,000. Individual municipalities also have the ability to apply fees, though they’re often much less severe.
Do you need a license to file a mechanics lien in Delaware?
When a payment dispute occurs, many unlicensed contractors worry that they won’t be able to recover their cash. Unlike some states, Delaware’s mechanics lien laws make no specific requirements for licensing in order to file a mechanics lien.
With that said, it’s never a good idea to perform work for which the state requires a license if you don’t carry one. Should a payment dispute arise, you’ll be able to file a lien, but the court might not look fondly upon your unlicensed status if you have to foreclose upon it.
Filing a lien in Delaware? Check out How to File a Delaware Mechanics Lien – Step-by-Step
Protecting your payments in Delaware
It’s not just civil penalties imposed by the State of Delaware the contractors need to pay attention to. If they don’t keep their eyes on specific deadlines and documentation, a payment dispute could derail a Delaware contractor’s business in no time at all. Protecting liens rights needs to be a priority.
Preliminary notices are incredibly important for Delaware contractors. Although the state doesn’t require contractors at any level to send them in order to preserve their lien rights, they should still utilize them. These documents serve as a professional introduction between your company and the people cutting the checks. They can also outline your payment policies, letting those folks know you’re serious about doing your job and getting paid for it.
Learn more – Delaware Preliminary Notice: Guide + Free Forms
Delaware also doesn’t make any requirement around sending payment reminders or Notices of Intent to Lien, but you should be sending them as well. Not only do these visibility documents help speed up payments in most instances, but they will also show the court you were actively communicating with the customer regarding non-payment.
Finally, the window to file a mechanics lien in Delaware changes based on tier. Prime contractors who contract directly with the project owner have up to 180 days from job completion to file a mechanics lien. For subcontractors and suppliers, the window closes at 120 days from last furnishing.
When it comes to enforcing these liens, Delaware considers the action to enforce the lien incorporated into the lien filing. This means the deadlines are the exact same 180-day window for prime contractors and 120-day window for subcontractors.
Don’t let these important deadlines slip by without protecting your payments.