So you’re thinking about setting up a general contracting business - congrats! What’s next?
Chances are you’ve never set up a contracting business in South Dakota. Whether you’re an old pro at starting businesses or this is your first leap into entrepreneurship, you want to make sure everything is set up correctly. After all, nobody wants the local government or the tax man on their back. While there are some requirements you need to sort out, getting a South Dakota contractor’s license isn’t hard.
Why Do I Need a South Dakota Contractor’s License?
As soon as you see the requirements and forms for getting your contractor’s license, your first instinct may be to shrug it off and leave the work for another day. Does the government really need to get into your business? They do, and for a good reason.
Business licenses make sure any random person can’t just walk off the street and onto a major construction site. Just like you wouldn’t want to share the highway with a seven-year-old driver, you don’t want to share competition space with an unqualified and dangerous business. An unlicensed contractor could undercharge you, perform lousy work, and then tarnish the reputation of general contractors.
Your South Dakota contractor’s license will also require business insurance. Just as business licenses are similar to drivers licenses, general liability insurance is like car insurance. If there’s an accident on the job and a person is injured, or property is damaged or stolen, insurance protects your personal finances. The average claim for property damage is $30,000. When you have business insurance, you don’t have to worry about paying all of that out of pocket.
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Steps to Get a General Contractor License in South Dakota
Get your notebook and pen ready - it’s time to go over the steps to get your contractor license in South Dakota.
Contact your local jurisdiction
Business license requirements are set on the state level, not the national level. That means that every state has the right to choose how to handle general contractor’s licenses. In South Dakota, there are no statewide licensing requirements for general contractors.
What does that mean for you? Instead of adhering to one standard process alongside all your fellow South Dakota general contractors, you’ll need to look to your local jurisdiction. Some steps that might vary between cities include:
- Application fees and renewal frequency
- Education or experience requirements
- Mandatory insurance coverage levels
There are state-level licenses for specialty contractors, though. Contractors that work on projects such as plumbing or electrical will need to apply for licensure with the South Dakota Department of Labor and Regulation. If you work on these types of projects, even just a little bit, you need to get a state license. Curious about what goes into applying for a license? We’ve got typical requirements down below.
Typical requirements for licensure
While there aren’t South Dakota contractor license rules that apply to the whole state, there are a few requirements you’ll probably see in your town. Here are some typical requirements for licensure.
Experience or education. Before you can get a contractor business and set up a new company, your city wants to know you have hands-on experience. Different levels of licensing can have varying requirements. Still, you’ll probably have to show proof of education or hours worked on the job.
Business registration. One decision you need to make is how to structure your company. If you want an LLC or corporation, you’ll need to register before applying for your license.
Contractor’s excise tax. South Dakota requires contractors to pay 2% of gross receipts from construction projects as an excise tax. You’ll have to apply online before you try to get a contractor’s license.
Pass an exam. In addition to education or experience, your local government will probably require that you pass a test based on your skillset.
Financial solvency or bond. If you leave a homeowner with an unfinished project, they may be able to reach out to the state and seek compensation. South Dakota wants to make sure you can pay these claims, so you may need to get a bond.
General liability insurance. The amount of insurance coverage you need will vary, but general liability insurance covers personal injury and property damage.
Worker’s compensation insurance. If you have or will have employees, you’ll have a few extra steps. This could include worker’s compensation insurance and setting up an unemployment tax account.
Application and fee. When you apply for your South Dakota contractor’s license, you’ll send supporting documents along with a filled-out application and fee. The number of years a license is good for before needing renewal may also vary.
Special steps for Sioux Falls
Want to get a South Dakota contractor’s license in Sioux Falls? Here are some special steps:
Take the construction supervisor exam. If you are working alone or overseeing other contractors, you need to pass a supervisor exam. It’s a timed test, but you’ll be able to bring study materials in.
Show proof of bond and insurance. Within 90 days of taking your exam, you’ll need to show proof of a $20,000 Compliance Bond and have at least $300,000 in general liability insurance coverage.
Special steps for Rapid City
If you want a contractor’s license in Rapid City, you have a few decisions to make. Here are a few unique points in your town:
There are 9 types of licenses with 6 subtypes. The type of license covers your specialty, such as residential contracting or roofing. Then, the subtypes indicate your experience levels like an apprentice or contractor.
License terms vary. Some contractor licenses need to be renewed annually, while others last up to three years.
Special steps for Aberdeen
Heads up contractors in Aberdeen, your process is a little different:
You need to apply in person. The city doesn’t provide their business license applications online. Instead, you’ll visit the Auditors Division of the Finance office within city hall at 123 South Lincoln Street.
Specialties have their own licenses. Aberdeen gives out business licenses for work types, including residential building contracting, plumbing, excavation, and more.
If you still have some South Dakota contractor’s license questions unanswered, check out the state’s new business checklist.
If you still need to get general liability and worker’s comp insurance before you can apply, get a contractor’s insurance quote to ensure you’re covered.
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