5 December 2019
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. But, 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 contractors license isn’t hard.
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 by requiring a license? 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, 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.
You may need to show proof of business insurance to get your license.
That’s where we come in. Compare free insurance quotes for policies as low as $22.50/month.*Start Here >
Get your notebook and pen ready - it’s time to go over the steps to get your contractor license in South Dakota.
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 to get a license, you’ll need to look to your local jurisdiction. Some steps that might vary between cities include:
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 for licensure down below.
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 when applying for your license.
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 before giving you your contractor license..
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.
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.
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.
Heads up contractors in Aberdeen, your process for licensure 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.
While North Dakota and South Dakota share a 360-mile border, they don’t share the same requirements when it comes to a contractor license. If you plan to do work north of that border, you should be aware of their licensing requirements.
North Dakota requires anyone doing work as a contractor to register as a business in the state, get business insurance, and apply for a license. You can do most of this through the North Dakota Secretary of State’s office.
Need more info? Check out our helpful guide to getting a contractor's license in North Dakota.
Yes and no. While only electricians and plumbers need to have a state-issued license, other trades, such as painting, are regulated by city or county laws. It’s best to check with the regulatory offices in the areas where you'll be working.
However, just like a general contractor, you’ll need to apply for a contractor’s excise tax license.
We pointed out above that certain types of insurance may be required to meet the requirements in many localities within the state. Even when it’s not required, having the proper business insurance can make a lot of sense. Of course, this is probably what you’d expect an insurance provider to say.
Fair enough, but consider these scenarios:
Let’s say you’re painting a customer’s living room when you accidentally spill bright blue paint on an expensive Oriental rug. The customer is furious and files a property damage claim against you.
Perhaps you're building a new back deck for a customer. Eager to see your progress, they wander out even though you asked them to stay off the structure. While descending the unfinished stairs, a plank collapses and they fall and break a bone. A lawsuit follows.
Or you’ve just installed a new toilet in a bathroom on the second floor of a customer’s home. Everything looks good at first glance, but as soon as the customer uses the toilet, water begins leaking through the floor and damages the living area below. Now, they want you to pay for the repairs.
If these examples have you worrying about all the other things that could go wrong, having business insurance can go a long way to putting your mind at ease. And that’s where we can help.
Spend a few minutes online, and we can get you on your way to being covered with a policy from one of the nation’s top insurers. We do all the legwork. You just choose the policy and payment option that works best for you.
After all, as a busy contractor, you’ve got more important work to do.
* Monthly payment calculations (i) do not include initial premium down payment and (ii) may vary by state, insurance provider, and nature of your business. Averages based on January - December 2020 data of 10% of our total policies sold.
I'm a freelance writer who has always had an interest in entrepreneurship, starting way back with lemonade stands. These days I write to help business owners with their everyday challenges and choices. When I'm not typing away, you'll find me eating pizza, volunteering at the animal shelter, or taking too many pictures of my cats.
This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry specific professionals who may better understand your business’s needs. Read our full disclaimer
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