Contractor

PSI administers the exams for the Tennessee Board for Licensing Contractors. All applicants are required to take the Tennessee “Business and Law” exam, but the Trade exam is only required for certain license classifications. Exams are typically valid for two (2) years by the Board.

Pre-approval is required by the Board to take the plumbing (CMC-A) or full mechanical (CMC) exam. Request approval by emailing a completed Pre-Approval Request Form to contractors.home-improvement@tn.gov. This form can be found on the Forms and Downloads page. There is a $50 fee associated with this request.

The same person taking the Business and Law exam is not required to take the trade exam, and up to two (2) people can take each exam for the company. The Qualifying Agent (QA) is the person who has been designated to take the exam(s) for the entity obtaining the license and must register with PSI. The QA may be an owner, a full-time employee, or officer. Those without ownership would need to complete the Power of Attorney form found on the Forms and Downloads page.

Schedule your exam(s) here. Additional information, such as reference materials and special accommodations, can also be found at this link. The exam is open-book.

Business & Law Reference Manual – Tennessee Edition: https://store.nascla.org/collections/tennessee

Exam Prep Courses

Applicants who wish to take an exam preparation course must do so through one of the Board-licensed providers below.

Trade Exams

Depending on your license classification, you may be required to take the “Trade” exam. You can see which classifications require the exam by reviewing the Classification Outline found on the Forms and Downloads page.

The following is a list of trade exams for contractors (building, electrical, and mechanical) offered and includes combined exams:

·         Residential (BC-A)
·         Commercial (BC-B)
·         Industrial (BC-C)
·         Res/Com/Ind (BC)
·         Res/SmCom (BC-A,b(sm) - (Projects less than $750,000)
·         Com/Ind (BC-B,C)
·         Electrical (CE)
·         *Full Mechanical -Plumbing & HVAC (CMC) Must be pre-approved
·         *Plumbing (CMC-A) - Must be pre-approved
·         HVAC (CMC-C)
·         **Fire Sprinkler (CMC-D)
·         Licensed Masonry Contractor (LMC) - Projects $100,000 or more

Reciprocity - Trade Exam Waivers

You cannot operate in Tennessee with a license from another state. However, Tennessee has a trade exam waiver agreement with several states. If you are actively licensed in one of the states below, and the type of license you are requesting requires a trade exam, you may be able to obtain a trade exam waiver. You may apply for a trade exam waiver by having one of the participating states listed below complete the License Verification form found on the Forms and Downloads page and return it with your application.

Alabama: General, Electrical, Residential, and HVAC

Arkansas: Commercial/Residential Building only

Georgia: Electrical

Louisiana: Residential, Commercial, Electrical, and Mechanical

Mississippi: Residential, Commercial, Electrical, Mechanical (Unlimited)

North Carolina: Residential/Commercial Building and Electrical

Ohio: Electrical, Plumbing, and HVAC

South Carolina: Commercial Contractors Licensing Board (Commercial only for Building, Electrical, HVAC, Plumbing)

West Virginia: Residential, Commercial, Industrial Building, Electrical, Mechanical, Masonry

Tennessee also accepts the NASCLA National Commercial exam.

Note that the trade exam waiver agreement only applies to "Contractors" licensed with the Board. It does not apply to other license programs (Home Improvement, LLE, or LLP).

Restricted Residential Limited License (BA-A/r)

Instead of taking the BC-A Residential Trade Exam and the Business & Law Exam, residential contractors who wish to perform work costing less than $125,000 (based on a financial statement) may complete a Limited License course through a Tennessee community college or vocational school.

Contractors must still meet all other application requirements; only the examination requirement is waived. The contract or permit value may not exceed the monetary limit assigned to the license, which includes the contractor’s cost of land and profit. There is no 10% monetary tolerance, and joint ventures are not permitted under this license.

To increase the license limit above $125,000 and remove the restriction, the contractor must take the required examinations and submit a reviewed financial statement.

List of approved Tennessee community colleges. 

The law requires a “Reviewed” or “Audited” financial statement prepared by a licensed, independent accounting firm. Applicants should engage a Certified Public Accountant (CPA) or Licensed Public Accountant (LPA) who is properly licensed to prepare these financial statements in the exact name and mode of operation to be licensed.

Follow these links to verify the licensure of:

Tennessee Accountants
Firms Enrolled in the AICPA Peer Review Program
Out-of-State Accountants: Ensure they have a non-resident mobility agreement with Tennessee.
International Guidelines

Guidelines

The prepared financial statement must be less than 12 months old at the time of submission of the initial application and follow the Generally Accepted Accounting Principles (GAAP).

- A “Reviewed” financial statement is required for limits of $3,000,000 or less.
- An “Audited” financial statement is required for limits exceeding $3,000,000.
 

Monetary Limit

The monetary limit is the total dollar amount for each individual project or contract. There is no limit on the number of projects a contractor may perform, so long as they are not split into phases to circumvent the law. There is a 10% tolerance for the monetary limit, except for the Restricted Residential Limited License (BC-A/r)

Monetary limits are calculated as 10 times the lesser of working capital or net worth, plus required experience. As an example, a $150,000 limit requires $15,000 in both working capital and net worth. Because the limit is based on the lesser of the two, if working capital is $10,000 and net worth is $200,000, the monetary limit would be $100,000.

To obtain an unlimited monetary limit, an applicant must show $300,000 in both working capital and net worth, plus required experience.

Supplemental Options:

1. Supplement the reviewed or audited financial statement with a Line of Credit (found on the Forms and Downloads page) to increase the working capital, or

2. Submit the financial statement with a Guaranty Agreement.

Guaranty Agreements

An indemnity (such as a Guaranty Agreement or Bond) is required from the owner(s) (personal or parent company) of the entity applying for licensure when the submitted financial statement shows a deficiency, including but not limited to:

1. Cash-only statements with little or no fixed assets (see Rule 0680-1-.13; considered deficient in plant and equipment).

2. Accounts receivable comprise the majority of working capital. An updated statement may be submitted showing that the receivables have been collected.

All indemnities expire at license renewal, not to exceed two (2) years.

Indemnity requirements by type:

Personal Guarantor: The Guaranty Agreement must include a personal financial statement from the owner(s). This statement does not need to be audited or reviewed and may be self-prepared. Personal supplemental statements may be submitted with the entity’s Review or Audit.

Parent Company Guarantor: The Guaranty Agreement must include a financial statement from the parent company, which does not need to be audited or reviewed unless the subsidiary has not provided an audit or review. Supplemental statements may be self-prepared and submitted with the entity’s Review or Audit.

A Bond in the Board’s required format may be submitted in place of a Guaranty Agreement in the amount of $500,000, or $1,000,000 for Unlimited monetary limits. An example of this format can be found on the Forms and Downloads page.
 

A Letter of Reference must be attached to your online application. This form can be found on the Forms and Downloads page within the Initial Application Package PDF. It must be completed by a past client or employer who can speak to your construction experience, or by a code official who has inspected your work. The reference does not need to be a Tennessee resident, but it cannot be a family member.

General Liability insurance is required based on your monetary limit. Workers’ Compensation insurance is also required, unless proof of exemption is provided. Additional details about insurance can be found in the Insurance Resources document on the Forms and Downloads page.

The Contractor’s Affidavit must be signed and notarized by all applicable individuals, including the qualifying agent, owner(s), partners, members, main officers, and major stockholders. This form can be found on the Forms and Downloads page. All blocks must be checked, and any sections that require explanation should have one attached. Please note that if you have complaints, convictions, or have previously bid where a license was required, you must interview with the Board.

Registration Requirements

Tennessee Corporations: Submit a copy of your charter and proof of registration with the Tennessee Secretary of State.

Out-of-State Corporations: Must register as a foreign corporation. Submit a copy of your charter and your Certificate of Authority.

Limited Liability Companies (LLC): Submit Articles of Organization and proof of registration with the Secretary of State, including out-of-state entities.

Limited Partnerships: Must register with the Secretary of State.

If operating under a DBA, the full DBA name must appear on your Secretary of State certificate and all other forms submitted with your application.

Obtaining a Local Business Tax License

A business tax license is obtained through the Department of Revenue. You must hold a business tax license for each city or county where you plan to operate. If needed, contact the IRS to obtain your Federal Employer Identification Number (EIN/FEIN).