Licensing StepsBoard for Licensing Contractors
Step 1 - Testing - Exam and Reciprocal Information
Exam Registration with PSI Services, LLC
Exam Information - Candidate Information Bulletin [pdf]
Online Exam Registration with PSI
Bookstores (Code Books and Reference Manuals for Exams)
- NASCLA Online Bookstore (Business & Law Reference Manual - Tennessee Edition)
- NASCLA Order Form (Reference Manual)
- PSI Online Bookstore (Reference Manual and Code Books)
Who takes the exam?
Individuals, those acting as the Qualifying Agent (QA) for the entity obtaining the license, may take the exam(s) on behalf of the business. The QA may be an owner, officer, or full time employee (the QA does not own the license; license is issued to the entity providing the financial statement, insurance, etc. The QA must register with PSI to take the exam. PSI has testing centers all over, including throughout Tennessee, as well as in other states. Walk-ins are not allowed and you must schedule an appointment ahead of time, but exams are offered daily. Scores are given upon completing the exam, so you know right away whether you passed. The same person taking the Business and Law is not required to take the trade exam and more than one person may take the exams for the company. PSI offers special accommodations for those with disabilities and this information is in the "Candidate Information Bulletin". The only individuals required to be approved before taking the exam are plumbers; pre-approval is required by our Board to take the plumbing (CMC-A) or full mechanical (CMC) exam. The pre-approval form is located in the "Candidate Information Bulletin" or from our website and may be faxed or emailed to the Board's office at: Fax# (615) 532-2868; or E-mail Contractor.email@example.com or call (615) 741-8307.
What contractor license exams are required?
There are two types of exams:
- Business and Law - $55
- Trade Exams (for various license classifications) - $55
The Tennessee "Business and Law" exam is required by all contractor license applicants. This exam is open book and you may obtain the "NASCLA Contractors Guide to Business, Law and Project Management" manual from one of the bookstores listed above or most professional book stores online. Books may be shipped for overnight delivery. A "Trade" exam may also be required, depending on the type of license classification requested (see "Contractor Classifications Outline"). For example, to build houses, the "Residential (BC-A)" trade exam would be required; for one of the 34 building categories or specialty, such as: "Landscaping (BC-29)", there is not a landscaping trade exam and only the "Business and Law" exam would be required. More examples are provided in the "Contractor Classifications Outline" as well as a list of all exams in PSI's Candidate Information Bulletin. (See also the examples listed below under the "Summary")
There are different types of contractors' license classifications requiring exams: Building (BC) - Combined for Residential, Commercial, Industrial); Residential Building (BC-A); Commercial Building (BC-B); Small Commercial (BC-b(sm); Industrial Building (BC-C); and combined building, such as BC-A,B; Electrical (CE); Mechanical (CMC); Plumbing (CMC-A); and Masonry (LMC). The Qualifying Agent (QA) is the person who has been designated to take the exam(s) for the entity obtaining the license and they may be an owner, or a full time employee or officer (those without ownership would need to complete the Power of Attorney (POA) as part of our license application, but do not send the POA to the testing center).
Trade Exam Waivers (Reciprocation)
Tennessee has a trade exam waiver (Reciprocal) agreement with several states, therefore, if you are actively licensed in one of these states, and the type of license you are requesting requires a trade exam, you may be able to obtain a trade exam waiver. In this case, only take the "Tennessee Business and Law" exam.
Restricted Residential Limited License (BC-A/r)
In lieu of taking the "BC-A" residential trade exam and "Business & Law" exam, residential contractors wanting to perform work where the cost is less than $125,000 (based upon financial statement), may take a "Limited License" course with a Tennessee community college or vocational school. The contractor MUST comply with all other application requirements, as the examination, only, is waived. A contract or permit valuation cannot exceed the monetary limit assigned to the license, which includes contractor’s cost of land and profit; there is not a 10% monetary limit tolerance; and not allowed to joint venture. In order to increase the license more than $125,000 to remove restriction, must take the exams and provide a reviewed financial statement. The classification for this license is " BC-A/r". For a list of these state community colleges, please refer to our website at: BC-A/r.
Registering for the Exam
The Candidate Information Bulletin has a list of all exams, outline, reference materials, books, security requirements, rules for using books for open book exams, and how to register for exams. The exam vendor is PSI Services, LLC. Out-of-state contractors may register with PSI to take exams at any of their exam centers (offered in over 26 states). The same person taking the Business and Law is not required to take the trade exam. You may register online with PSI to schedule an exam (they are set up by appointment) and offered in various locations statewide. You may also call PSI (800-733-9267), however, online is found to be quicker. See "Reciprocal" information for trade exam waivers. PSI uses your social security number to register for the exams for identity purposes and you are required to provide a photo-ID.
What if the QA leaves?
The license is obtained in the name of the entity providing the financial statement. Therefore, it may be a sole proprietor, corporation, partnership, or LLC. The license belongs to the owner of the entity providing the financial statement, therefore, it does not necessarily belong to the Qualifying Agent (QA), unless they are also the owner. If the QA leaves the licensed entity, the license remains with the owner and they have 90 days to replace the QA and supply the revision form, "QA - Notice of Change" before the license becomes invalid or the classification is removed (TCA 62-6-115; Rule 0680-1-.23) See the "Revision" forms for changing, adding, and removing a QA. A contractor’s license is issued with a classification and monetary limit in the name of the entity on the financial statement. The QA leaving needs to be reported to the Board within 10 days and this may be done by completing the revision form, "QA - Leaving Notification". All these forms are available from the "Forms and Downloads" section of our website.
Please note, the exam center offers special accommodations for those with disabilities, or for those wanting to take a Tennessee exam in another state. Review their "special accommodations" in their "Candidate Information Bulletin")
Exam Scores and Retesting
The person taking the exam will know immediately whether they have passed or failed the exam. PSI offers "Exam Review" for a fee to review areas for your strength and weaknesses. Exam scores are generally accepted for two (2) years by the Board. However, if the contractor fails to apply for a license within this time period and remains active in the construction industry, such as performing projects where a license is not required (under $25,000), or working for another licensed contractor, or in another state, etc., then the Board may accept the scores after the two year period. This would also be the case for a contractor wanting to reinstate an expired contractor's license. This is decided by the Board and the staff cannot make this determination. Therefore, a written request would need to be submitted with your contractor's license application to be reviewed by the Board at their next regularly scheduled board meeting. A Contractor or Qualifying Agent who has taken the exam and not been inactive more than two years, is typically not required to retest when obtaining an additional license (Note: must have majority ownership to be listed on more than one license).
Exam Guidelines and Security Procedures for Books
Be sure to review important guidelines in PSI's "Candidate Information Bulletin" as to the reference materials (code books, etc.). The testing center does not allow using books which have notes written inside and you may not write in the books during the examination. Doing so may be considered as a security breach of the confidential exam questions. Permanent tabs are allowed, however, post-it notes cannot be used. In addition, only silent, non-programmable calculators may be used when taking the exam. You will be required to show two (2) forms of identification. One must be a valid form of government issued identification(driver's license, state ID, passport) which bears your signature and pre-prited legal name. (Note: If you have a suffix, such as: Jr., Sr., III, etc., this must be included!)
Exam Prep Courses
For contractors wanting to take a exam preparation course, the Board requires these providers to be licensed. A list of these course providers are available from our website.
All applicants must take the Tennessee "Business and Law" exam which is open book and based upon NASCLA's Tennessee "Contractors Guide to Business, Law and Project Management" reference manual which may be purchased by the publisher, exam vender or professional book stores. Some applicants may be required to take a trade exam (see list of trade exams below). If you do not see a trade exam which falls within your profession, a trade exam probably is not required, but feel free to contact our office by fax at: (615) 532-2868 or by email at: Contractor Exam Information or you may call the office at 800-544-7693 or direct at (615) 532-3983. If you experience problems with PSI, the exam vendor, you may report these complaints to our staff by email at: Contractors.Home-Improvement@TN.Gov
Reciprocity is a trade exam waiver, only. The following states have agreed to accept many exams with Tennessee, therefore, if you are actively licensed without disciplinary action, we will accept their trade exam score from: Alabama (Building, HVAC and Electrical Boards); Arkansas; Georgia (Commercial); Louisiana; Mississippi; North Carolina (Residential and Commercial, only); Ohio (Electrical, HVAC and Refrigeration - eff. 1/1/2012); and South Carolina. These are the only states in which Tennessee has a trade exam waiver agreement. More information is available on the "Reciprocation" section on our website. Note: If you have been disciplined or convicted of a felony, the Board will not accept.
License classifications and monetary limits are based on experience, equipment, as well as a trade exam in some cases. A list of classifications may be reviewed from the web at: "Classification Outlines" or review an outline of license classifications, which is from the published Rules with the Tennessee Secretary of State, Section 0680-1-16. The exam vendor, PSI Services, LLC, administers the exams. Fees, reference books and online registration are available at PSI's Website or you may review the CIB (Candidate Information Bulletin) [pdf] on their website.
EXAMS (Cost $55)
Business & Law (required for all new applicants; does not have to be taken by the same person taking the trade exam) and a trade exam may also be required.
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
*Effective May 24, 2007, must be preapproved to take the CMC-A plumbing contractors exam by providing evidence to the Board of three (3) years' experience.
**Fire Sprinkler contractors must also obtain licenses with the Division of Fire Protection, as a Firm and RME (Registered Managing Employee).
Examples for trade exams needed for classifications:
- Build residential houses only, take the BC-A exam.
- Construction Manager is required to take the full BC exam.
- Residential, commercial and industrial building, take the BC exam. (NOTE: Do not take the BC exam unless you can show experience on your application or may be limited to specific class.)
- Build homes and commercial projects, (such as a doctor’s office, less than $750,000), need the BC-A and BC- b(sm) exams OR may take the combined BC-A,b(sm).
- Commercial building in excess of $750,000, BC-B exam.
- A BC-B or BC is needed to build a water/sewer plants or to get a MU classification.
- Communication/cell towers; no trade exam.
- Electrical wiring contracts in excess of $25,000, need the CE exam
- Work on electrical transmission lines/sub-stations, needs CE-A,H (high voltage), only.
- Plumbing, HVAC, Refrigeration, and Process Piping; needs full CMC (mechanical).
- Process Piping - covers welding of the piping system; NO test, (CMC-B) classification.
- Gas piping: A contractor with CMC, CMC-A or CMC-C may perform gas piping to everything, such as water heaters, laundry equipment, kitchen equipment, and to appliances, gas grills, swimming pool heaters, or gas logs. (Always check with local codes for their requirements.)
- Fire Protection/Sprinkler contractors must pass the contractor's CMC-D exam. Also, must obtain licenses with the Department of Fire Prevention (615) 741-7190
- Geothermal System requires a CMC-C (HVAC) exam. The "Well Driller" needs to be licensed with Department of Environment and Conservation (800-523-4873)
- Electrical wiring, in excess of $25,000, must take the CE (electrical exam). To obtain a license to only perform projects less than $25,000, check with the local government office to obtain their license. In some cases, may need our state LLE (Limited Licensed Electrician) license for permits and inspections. For an LLE license application, call our office at (615) 253-2144 or download from the LLE Section Website.
- Solar Panel Installation - No trade exam; apply for a specialty license, but cannot make electrical connections without a CE (electrical) license or would need to hire a licensed electrician.
- Landscaping - No trade exam; apply for a BC-29 classification.
- Audio and low voltage equipment - No trade exam; specialty license or CE-D.
- Solar Panel - Must state you will hire an electrical subcontractor or an electrical trade exam will be required.
- Alarm systems - Check with the "Alarm Systems Contractors Board" for their license and requirements (these licensees are exempt from a contractor's license, pursuant T.C.A. 62-6-135).
- Plumbers performing projects less than $25,000, may need the state’s LLP (Limited Licensed Plumber) license. Check with the local government to see if accepted. This is a separate license within the Board. For an LLP application, call (615) 532-3994 or download from our website at: LLP Application
- Contractors, with a CMC-A license are exempt from the LLP requirements
- Masonry projects $100,000 or more require the LMC (Licensed Masonry Contractor) exam
Be sure to check in the county you plan to work. (electrical (CE) contractors are exempt from OBTAINING AN ADDITIONAL LICENSE AS AN LLE; CMC and CMC-A Plumbing/mechanical are exempt from the Additional LICENSE AS AN LLP. Must follow local license requirements and pay fees.
This is an excerpt of the "Classifications Outline" and the following trades do not require a trade exam; based upon equipment and experience, unless, obtaining more than five subcategories under one major classification (or as indicated below):
Building Subcategories such as: "Acoustical Treatments" (BC-1;) through "Irrigation" (BC-33;) Full "BC" exam would cover all; BC-A would cover all for residential, only. Obtaining more than five (5) subcategories would require a trade exam. (Refer to T.C.A. Section 62-6-112 and Rule 0680-1-.16 of the Tennessee law for a complete listing, or review in the application; and also a "Classification Outline" is on the website's "Other Resources").
Examples of the 34 building subcategories: BC- 7 (Institutional and Recreational Equipment); *BC-17 (Elevators, Escalators, and Dumbwaiters); BC-27 (Outdoor Advertising); BC-29 (Landscaping); BC-28-Excavation; BC-31 (Demolition); etc.
*Note: Check with the Department of Labor and Workforce Development for other requirements for Elevators and Boilers.
Masonry - Licensed Masonry Contractor (LMC) exam is required to perform masonry where the total project, including materials and labor, is $100,000 or more. This applies to prime and subcontractors. For masonry less than $100,000, the BC-9 is acceptable for a prime. See the definition of masonry in the law in T.C.A. 62-6-102(4)(A) and (E)(5).
Low Voltage (less than 70 volts) : Sound, Intercom, Fire Detection; Telephone Lines (CE-F); and Cabling (CE-G); or *Alarm Systems (CE-D) - No exam with our Board for a low voltage CE-D; however, must obtain license with the "Alarm Systems Contractors Licensing Board" for their separate licensing and examination requirements. More information at: (615) 741-9771 or their website.
*Note: Alarm System licensees are exempt from obtaining an additional license as a contractor, pursuant T.C.A. 62-6-135. A contractor licensee with a CE or CMC-C must register with the Alarm Systems Contractors Board in order to install alarm security systems.
Heavy Construction (HC) such as: Marine (Docks, Harbor Improvements) HC-A; Dams, Dikes, Levees and Canals (HC-D); Structural Steel Erection (HC-1); Clearing, Grubbing, Snagging and Rip Rap (HC-5); Storm Damage Restoration.
Well Drillers need to be certified with the Department of Environment and Conservation.
*Highway, Railroad and Airport (HRA) such as: Grading and Drainage (HRA-A); Base and Paving (HRA-B); Bridges and Culverts (HRA-C);**Well Drilling (HRA-E.4).
*Note: Highway contractors bidding to the Tennessee Department of Transpiration (TDOT) would need to pre-qualify with this department and a license from our Board may not be required.
Municipal Utility (MU) such as: Underground Piping (MU-A); Grading and Drainage (MU-C); Gas Distribution and Transmission Lines (MU-A,1). (Water Well Drillers must be certified with the Department of Environment and Conservation and may be contacted at 800-523-4873.) Full "MU" requires a BC or BC-B trade exam; however, a contractor with a MU or BC or BC-B is considered acceptable to bid water treatment plants.
Environmental Specialties : Asbestos Handling (S-A); Underground Storage Tanks (S-B); Lead Based Paint Abatement (S-C); Hazardous Waste Removal (S-D); and Air, Water or Soil Remediation (S-E). (Must attach designated qualifying agent’s (QA) training certifications and resum'e in these areas.) These contractors may need to check with the Department of Environment for further state requirements at 888-891-8332 or their Department of Environment website.
Specialties : Cell/Communication Towers; Equipment Installation; Vinyl/Wood Siding; Fabrication of Above-Ground Storage Tanks/Vessels; Glass Installation; etc. Note: Specialty license classifications are for unique types of contracting where there is not a standard classification provided in the Rules. The Board specifies the exact type of work you perform, such as "S-Installation of Paint Finishing Equipment", "S-Solar Panel (must have a CE electrical license to perform electrical wiring or hire an electrical subcontractor); S-Meter Installation (must have a CE electrical license to perform electrical hook-ups).
Medical Gas certification is required by the American Medical Gas Institute (AMGI) or the Piping Industry Progress and Education Trust Fund (PIPE), with a minimum of 32 hours of training, with eight (8) of these hours in brazing. You may also check with the National Inspection Testing Certification (NITC) for local certification locations at 877-457-6482.
Note: Contractors with non-tested trades or "specialty" license classifications, cannot perform any electrical, mechanical or plumbing in excess of $25,000, and would be required to subcontract to properly licensed contractors. Example: A contractor with classification "S-Food Service Equipment" would be required to hire a licensed mechanical contractor to perform refrigeration portions in excess of $25,000.
Step 2 - Financial Statement
WHO MUST PREPARE THE FINANCIAL STATEMENT?
The law requires a Reviewed or Audited financial statement which must be prepared by a licensed independent accounting firm. Contact a Certified Public Accountant (CPA) or a Licensed Public Accountant (LPA) who is properly licensed to prepare a "Reviewed" or "Audited" financial statement in the name and mode of operation to be licensed. Contractors should check with the license roster to ensure the *name they choose for the license is available and this may be confirmed at: https://verify.tn.gov
- In Tennessee, you may check with the Tennessee Board of Accountancy to perform a License Verification Search to verify if they are properly licensed as both a firm and individually.
- For those out of state, you may check at http://www.cpaverify.org/ to ensure the CPA is properly licensed in a state that has a non-resident Mobility agreement with Tennessee, approved to prepare an Audit or Review and follow substantially equivalent accounting standards and this may be confirmed at: https://www.cpamobility.org/
- International guidelines are available at: http://nasba.org/international/
*Effective July 1, 2014, the name cannot be similar to another licensee.
WHAT TYPE OF FINANCIAL STATEMENT IS REQUIRED?
Pursuant T.C.A. 62-6-111(b)(3-4), the CPA/LPA must prepare an Audited or Reviewed financial statement. The Board requires the financial statement to be current (less than 12 months), and according to Generally Accepted Accounting Principles (GAAP).
- Reviewed Financial Statement (required for a monetary limit of $1,500,000 or less)
- Renewal does not require a Review and an in-house statement may be provided
- Audited Financial Statement (required for a monetary limit exceeding $1,500,000)
- Renewal does not require an Audit; may supply a Review or Audit from a CPA
- Compiled financial statements are NOT acceptable; must be a Reviewed for Audited financial statement prepared by a CPA/LPA.
- Financial statements prepared on an income basis are NOT acceptable.
- Income tax statements are not acceptable as a financial statement.
- Contractor licenses are issued according to the legal NAME appearing on the financial statement and the name should match on ALL related information required in the new license application, such as the corporate Charter, Articles of Organization, Reference, Contractor’s Affidavit, Line of Credit, etc. In addition, the contractor should only operate in the name as licensed.
- Subsidiary without Audit
- Parent company may supply the Audited financial statement for a subsidiary obtaining the license, but must provide an indemnity, such as a Guaranty Agreement or Bond.
- An in-house financial statement must be provided by the subsidiary (entity obtaining the license), in addition to the parent company's audited financial statement and indemnity.
Guaranty Agreement Required
An indemnity, such as a Guaranty Agreement or Bond is required from the owner(s) (personal or parent) of the entity applying for the license whenever the financial statement provided shows a deficiency, such as:
- Cash statement - cash without fixed assets, etc. (see Rule 0680-1-.13; considered deficient of plant and equipment); or
- Accounts Receivables - make up the majority of working capital
- Or - May supply update showing the Receivables have been collected
- Personal Guarantor - Guaranty Agreement must include a personal financial statement from the owner(s) and is not required to be an audit or review; may self prepare personal supplemental financial statements with the entity's Review or Audit.
- Parent Company Guarantor - Guaranty Agreement must include a financial statement from the parent company and it is not required to be an audit or review, unless, the subsidiary did not supply the audit or review. May self prepare supplemental financial statements with the entity's Review or Audit.
- A Bond in the Board's format may be supplied in lieu of the Guaranty Agreement, in the amount of $500,000; or $1,000,000 for an Unlimited monetary limits.
- Expiration of indemnities occurs at renewal time (no more than 2 years)
Indemnity forms are available here.
IS FINANCIAL STATEMENT INFORMATION CONSIDERED PUBLIC RECORD?
No. Please review T.C.A. 62-6-124. The financial statement portion of the application is not public information and considered confidential (may be released only by a Subpoena with an Order of Protection). Effective September 25, 2012, the Board considers indemnities as part of the financial statement.
WHY IS A FINANCIAL STATEMENT NEEDED?
Every contractor is assigned a monetary limit on their license, as to the size of project they wish to contract or bid. This limit must cover the total project and it cannot be split into phases of smaller contracts to circumvent the law. The total contract should include materials, labor, and profit. For example, if a residential contractor is building a house for a consumer, on their land, the land would not be part of the contract. However, if the contractor is not building on the consumer's land, then it would be part of the total contract price; could not be split into two contracts, one for land and one for the house. In addition, there is not a limit on the amount of single projects ongoing. A contractor with a $200,000 limit may construct as many of these homes as long as each one does not exceed the limit. A contractor is allowed a 10% tolerance, unless, they have a BC-A/r classification (residential restricted limited license).
Monetary Limit Determination
- Inform your accountant of the size license you need.
- For example, if you plan to contract homes no more than $150,000 per contract, your CPA can help determine if your financial statement meets the criteria.
- Monetary limits are based 10 times the lesser of both working capital and net worth (plus experience).
- In order to hold a license with a limit of $150,000, you would need to show working capital and net worth of at least $15,000, as well as experience for this amount.
- Since the limit is based on the lesser of the two, a contractor with a working capital of $10,000 and net worth of $200,000 would qualify monetarily for a limit of $100,000.
- The contractor could supplement their reviewed for audited financial statement with a "Line of Credit" (on the Board’s format) in the amount of $5,000 to increase working capital; or
- Submit a personal or parent company financial statement with a *"Guaranty Agreement".
- Personal supplemental financial statements may be prepared by the contractor, in addition to providing their required review or audit. Personal or parent supplemental statements are limited to 50% of working capital and net worth.
- The Board may limit the monetary license limit based on prior experience. Be sure to list all experience of owners and officers.
- If the working capital is mainly uncollected accounts receivable, the Board may not utilize the full amount.
*A Bond in the Board's format may be supplied in lieu of the Guaranty Agreement, in the amount of $500,000; or $1,000,000 for an Unlimited monetary limits. (At renewal time, the Guaranty Agreement or Bond may be removed by making a request to the Board and providing an updated financial statement meeting the requirements, to replace it.)
Unlimited License Limit
To obtain an unlimited monetary limit on a license, the contractor must show $300,000 in both, working capital and net worth, as well as experience, with an audited financial statement. Cash only statements must include a Guaranty Agreement with a supplemental financial statement, as well as those with the majority of capital listed as uncollected accounts receivables. At renewal time, a contractor may supply a "Reviewed" financial statement for unlimited.
Working Capital and Net Worth
Please ask your CPA/LPA to assist you with determining the amount of your working capital and net worth to ensure you qualify for the limit requested. Please take in consideration of experience and whether the majority is uncollected receivables. Working capital is current assets minus current liabilities. Net worth is total assets minus total liabilities.
CURRENT ASSETS are cash and those assets that are reasonably expected to be realized in cash or sold or consumed within one year or within a business’s normal operating cycle if it is longer. Generally, current assets include the following:
- Cash and cash equivalents available for current operations
- Marketable securities representing the investment of cash available for current operations, including investments in debt and equity securities classified as trading securities.
- Under billings on work in progress
- Inventories (to include materials and/or houses built for sale). Also, developed lots for sale. Raw, undeveloped land is not a current asset.
- Retirement Plans, specifically an IRA, 401K and Profit Sharing, will be allowed at 50%
- Cash surrender value of life insurance policies
- Trade accounts receivable and notes and other receivables that are expected to be collected within one year (if this amount represents the majority of working capital, the Board may not utilize the full amount without a guaranty and personal financial statement)
- Prepaid expenses such as insurance, interest, rents, taxes, etc.
Note: The Board does not consider notes receivables from related parties as a current asset
NON-CURRENT ASSETS are the following and not current assets, since they generally are not expected to be converted into cash within one year:
- Related party or owners receivables (not allowed as a current asset)
- Cash restricted for special purposes (Restricted cash may be classified as a current asset if it is considered to offset maturing debt that has been properly classified as a current liability)
- Long term investments
- Receivables not expected to be collected within one year
- Land and other natural resources
- Depreciable assets (buildings, equipment, tools, etc.)
- Prepayments or deferred charges that will not be charged to operations within one year
- *Notes receivables from stockholders/related parties
*The Board may accept a Guaranty Agreement from stockholders or related parties, supplied with their financial statement, to consider counting this as a current asset.
CURRENT LIABILITIES are obligations whose liquidation is reasonably expected to require (a) the use of current assets or (b) the creation of the other current liabilities. Generally, current liabilities include the following:
- Payables for materials and supplies
- Line of Credit balances and credit card balances
- Amounts collected before goods or services are delivered (over billings on jobs in progress)
- Accruals for wages, salaries, commissions, rents, royalties, and taxes
- Other obligations, including portions of long-term obligations, that are expected to be liquidated within one year*
NON-CURRENT LIABILITIES do not include long term notes, bonds, and obligations that will not be paid out of current assets.
NOTE: All financial statements submitted should separate current portion of long term debt according to standard accounting principals.
Monetary Limit Assigned
The monetary limit is the total dollar amount per each individual contract or project. A contractor cannot split a contract into phases to work within their limit, however, a 10% tolerance is allowed. A contractor with a monetary limit of $150,000 may contract up to $165,000 without being in violation (see Rule 0680-01-.13). In addition, there is no limit of the number of projects a contractor may perform, as long as a project has not been split into phases to circumvent the law. There is not a 10% tolerance for the BC-A/r restricted residential licensees.
Supplemental Working Capital and Net Worth
Line of Credit
A Line of Credit (LOC) in the Board’s exact format may be considered to supplement working capital, only (does not supplement net worth). The LOC is an option available for those requesting a larger limit than one in which their financial statement qualifies. The LOC must be in the same name as on financial statement, and must be in the EXACT format or it will not be acceptable.
A Guaranty Agreement (GA) may be supplied with a contactor's personal financial statement or parent company's financial statement to supplement the licensed entity's working capital and net worth. The supplemental statement is only used up to 50%. For example, a contractor with a net worth of $50,000 is wanting a license for $1,000,000, which requires a net worth of $100,000. In order to supplement the net worth on the personal statement, it would need show a minimum of $100,000 to be utilized as $50,000.
The Board may require the submission of additional financial information and may also require the financial statement to be audited and attested to by a certified public accountant (CPA). In addition, the financial statement may be examined by the Comptroller of the Treasury or their designee. The Board is charged with the responsibility of protecting the safety and welfare of the public, therefore, required to ensure the financial solvency of an entity obtaining a license. TCA 62-6-111; TCA 62-6-116; 62-6-124; Rule 0680-1-.13; Rule 0680-1-.14; and Rule 0680-1-.15.
Financial Statement Resources
- CPA (Certified Public Accountant) and Licensed Public Accountant - Information
- Guaranty Agreement and Bond Forms - Policy
- Line of Credit Form (To supplement Working Capital, only) [pdf]
- License Application (See financial statement instructions) [pdf]
- Guaranty Agreement (Format and Instructions)
Step 3 - Letter (s) of Reference and Proof of Insurance
Letter of Reference
Submit the "Letter of Reference" from the application and have it completed by a past client or employer who may comment about your construction work/experience OR a code official who has inspected your work. Only one reference letter is necessary. Please include the completed reference with your application. (The reference does not have to come from a Tennessee resident. Cannot use a family member's reference.)
Proof of insurance
General Liability is required based upon the monetary limit of a contractor. Workers' Compensation insurance is required or you may supply proof of exemption. More information is on the "Other Resources" section of our website or at: Insurance Information
See law updates for Workers' Compensation at the "Laws, Rules and Regulations" section of the website.
Step 4 - Corporations, Limited Liability Companies, Etc.
TENNESSEE SECRETARY OF STATE
The Secretary of State’s office may be contacted at (615) 741-2286 or visit their website.
- Tennessee corporations must submit a copy of their Charter and proof showing they have registered with the Tennessee Secretary of State’s Office.
- Out-of State corporations must register as a foreign corporation and submit a copy of their Charter, along with a copy of their Certificate of Authority showing they have registered their charter (we may accept a copy of their application stamped "FILED" from the Tennessee Secretary of State's office in order to meet the 20th deadline).
- Limited Liability Companies (LLC) must submit a copy of their Articles of Organization, and proof showing they have registered/filed with Tennessee Secretary of State, including out of state entities.
- Limited Partnerships must register with the Secretary of State.
- Exemption Registry for Workers' Compensation as a "Construction Services Provider" requires registration with another section of the Secretary of State's office.
- At renewal time, your status must be "Active" in order to renew. If dissolved, you will need to apply for a license "Revision" to change the mode of operation (requires a new financial statement and approval by the Board). If you change the name of a registered entity with the Secretary of State, you must also request a license "Revision" to amend the contractor's license, prior to operating in the new name or mode of operation.
NAME ON LICENSE
Check with the Board's roster of licensed contractors to ensure the name on the license is available at: https://verify.tn.gov/ Effective July 1, 2014, the name on the license cannot be similar to another licensed entity. Make sure your entity is filed in the same name as the financial statement. The contractor's license is issued in the legal name and mode of operation exactly as on the financial statement. Bidding and contracts must be in the exact name as licensed, as well.
DBA (Doing Business As)
If your entity is in a name with a "DBA", this will need to be included on the certificate obtained from the Secretary of State and on the financial statement, exactly as on the form. For example, if the entity is wanting to go by, "John Doe DBA Doe's Quality Construction, LLC", this whole name must be on ALL documents; contracts must be in the name as licensed and could not be prepared as "Doe's Quality Construction, LLC" or "John Doe".)
TENNESSEE DEPARTMENT OF REVENUE
Contact the Department of Revenue for obtaining a local Business tax license for each city or county where you plan to perform work. If needed, you may contact the IRS for a Federal Employee ID # (EID/FEIN).
Step 5 - Complete Contractor’s Affidavit
Be sure the affidavit is signed and notarized by all applicable individuals (qualifying agent, owner(s), partners, members, main officers and major stockholders). All blocks must be checked. Attach an explanation where applicable. If you have complaints, convictions or have bid where a license is required, you will be required to interview with the Board. Supplying false information is grounds for having a license denied. Those bidding without a license, this violation requires the license to be held six (6) months. See T.C.A. 62-6-118 and 120.
The Power-of-Attorney form in the application is required if the Qualifying Agent is not an owner with majority ownership.
Step 6 - Submit Application and $250 Fee
Once the entire application is complete, submit with the $250.00 nonrefundable application fee. A letter notifying receipt will be sent to all applicants (Do NOT contract prior to being approved by the Board.)
Hardship requests (those qualifying for an early/emergency review prior to the next Board meeting) should be sent by email after completing the online application. See more information for "Hardship Criteria".
The Board meets every other month, six (6) times per year. Applications are due on the 20th of the month prior to the Board meeting. For example, to have your application reviewed at the January Board meeting, you must turn in your application by December 20th. If the 20th is on a holiday or weekend, the next business day is considered the deadline. The application must be complete to be considered meeting the deadline. The Board meets during the months of January, March, May, July, September and November. See “Public Meetings Information for more information.
Staff will notify applicants by email or mail to confirm receipt of your application and whether the interview is waived. If the application was lacking information and incomplete, you will be notified of additional information needed.
Do NOT contract, bid or offer to engage before obtaining the license. Doing so could prevent being awarded the contract, civil penalties and license held for up to six (6) months. See T.C.A. 62-6-120.
Step 7- Board Review
An interview may be required with a Board member at the regularly scheduled meeting (see "Calendar" for meeting dates) for those not meeting the criteria to have the interview waived (see "Waiver of Interview" below). If an interview is required and the application was received prior to the deadline date to be scheduled, an "admission" letter is sent with the date, time and location of the Board meeting. The interview is informal and takes no longer than 30 minutes. However, due to scheduling volume, waiting time could take more than an hour. Contractors are generally interviewed by a Board member who is familiar with the type of license requested. For example, an electrical contractor is typically interviewed by a Board member experienced in the electrical field. Therefore, some contractors will be seen earlier. The application is reviewed and general questions will be asked about contracting experience and to make sure the license classification covers your type of projects. Use this time to ask the Board member advice or the staff questions concerning the licensing law. You may request your license I.D. number at this time, however, it is not approved until the full Board votes during their business meeting. There is not a required dress code.
Those who are obtaining a restricted residential (BC-A/r) must interview; those with not enough experience provided on the application (3 years); those with felony convictions; and those with complaints are also not waived. These applicants will receive a letter notifying an interview is required.
Board Meeting Schedule (Calendar)
WAIVER OF INTERVIEW
The contractor’s interview may be waived if the contractor's application was received complete and in order. Waived applicants will not be approved for a license until after the Board meets; therefore, do not use your license ID number until approved. At the "License Search", the license status will show "Active" with an expiration date; classification; an the monetary limit assigned to the license. License certificates are issued after the Board meeting and they take approximately 1 to 2 weeks for staff to complete.
Step 8- License Issued
The staff will process your license to be issued after approval by the Board meeting. You will be mailed a license certificate which will have your license ID number, classification, expiration date (this is the same information required to be on the outside of a bid envelope!) and also your license monetary limit. You may check the status of the license issuance at: License Search. For tips on searching licenses, see "License Search Tips".
The license is issued for two years. Renewals are mailed 90 days prior to expiration date; required to be renewed 30 days prior to expiration.
Contractors may apply for a license revision in order to make changes. Such as, change the mode of operation; increase their licensed monetary limit; add a classification; add or remove their Qualifying Agent; or may retire the license if they are not working and want to cancel insurance. This information is available on the "Forms Downloads" section on the web.
Due to changing laws, please review our website for updates.