The path to operating as a general contractor in Maryland requires adherence to state and local regulations. The construction industry is highly segmented, and the specific license you need depends on the type of projects you intend to undertake. Successfully navigating this regulatory environment involves careful attention to business formation, financial stability, and demonstrating knowledge of construction law and practices. This guide outlines the necessary steps to secure the required authorization.
Determine Your Scope and Licensing Type
The initial step involves defining the scope of work, as Maryland does not issue a single, comprehensive state-level “general contractor” license. The regulatory framework splits between residential and commercial projects. New residential construction and commercial projects are typically licensed at the county or municipal level, with requirements varying across jurisdictions.
The Maryland Home Improvement Commission (MHIC) license is the most common authorization and is required for working on existing homes. This license is mandatory for any alteration, repair, remodeling, or replacement on residential properties with three or fewer units. Most aspiring general contractors secure the MHIC license first due to the high volume of residential renovation and repair work.
Establish Your Business Infrastructure
Before submitting any licensing application, you must establish the legal and structural foundation of your business. This begins with choosing a formal structure, such as a Sole Proprietorship, Limited Liability Company (LLC), or Corporation, which dictates liability and tax obligations. You must then register the business name with the Maryland Department of Assessments and Taxation (SDAT) through the Maryland Business Express online portal.
Registering with the SDAT provides your business with a unique state identification number. You must also secure a Federal Employer Identification Number (EIN) from the Internal Revenue Service (IRS), which is required for opening business bank accounts and managing payroll. Corporations and LLCs must also obtain a Certificate of Good Standing from the state, confirming the entity is compliant with all filing requirements.
Meet the Core Eligibility Requirements
The MHIC imposes requirements to ensure that license holders are qualified and financially stable. Applicants must demonstrate a minimum of two years of relevant construction experience in the trade. This experience can be fulfilled through hands-on work in home improvement or by providing documentation of equivalent educational training, such as a degree in construction management.
Applicants must also demonstrate financial stability, requiring a minimum net worth of $20,000, assessed based on personal assets. If the net worth standard cannot be met, the applicant must secure a two-year surety bond in the amount of $20,000 instead. Furthermore, applicants must obtain general liability insurance coverage with a minimum value of $50,000, and the MHIC must be designated as the certificate holder on the policy.
Navigate the MHIC Application Process
The application phase involves compiling and submitting documentation to the MHIC. This paperwork must include proof of two years of experience, a current credit report no older than 90 days, and certification of the liability insurance policy. For financial documentation, you must submit a personal financial statement, which may require supporting bank and real estate assessment notices if demonstrating the minimum net worth.
The initial application must be accompanied by the necessary fees, including an application fee of $281.25 and a $100 assessment for the MHIC Guaranty Fund. The Guaranty Fund is a consumer protection mechanism that pays homeowners for financial losses resulting from defective work or failure to complete a contract. If all documentation is in order, the MHIC review process typically takes two to three weeks to process.
Prepare for and Pass the Licensing Examination
The licensing process requires successfully passing the Maryland Home Improvement Contractor Examination, administered by the testing service PSI. This is an open-book exam consisting of 55 multiple-choice questions, and candidates are allotted 150 minutes for completion. To pass the examination, you must correctly answer at least 39 questions, achieving a score of 70 percent.
The content focuses on the legal and business aspects of operating a contracting firm in the state. Sections cover Maryland Home Improvement Law, the Door-to-Door Sales Act, state Labor Laws, Safety Regulations, and Estimating principles. Passing this examination is required before the MHIC will approve the final license.
Understand Local Licensing and Permit Requirements
Commercial construction and new home building projects are regulated separately from the MHIC license. These projects often require a license or registration through the Clerk of the Circuit Court in the county where the work is performed. Requirements for these local licenses vary substantially; for example, Prince George’s County requires applicants for a Building Contractor’s License to submit a signed financial statement, credit history verification from a supplier and a lender, and proof of enrollment in an approved new home warranty security plan.
Contractors must also register with the Home Builder Registration Unit of the Attorney General’s Office for new home construction. Beyond licensing, every county and municipality has its own permitting process for construction projects, which must be secured before work begins. Contractors must verify both local business licensing and specific project permits for every jurisdiction they operate within.
Maintaining and Renewing Your License
The contractor license issued by the MHIC must be renewed every two years to remain valid. The renewal process requires the payment of an updated fee, which includes an application fee and a $175 assessment for the MHIC Guaranty Fund. The renewal application should be submitted well in advance of the expiration date to prevent a lapse in legal operating status.
There are no continuing education requirements for renewal of the MHIC license. However, contractors must ensure their general liability insurance policy remains active and compliant with the minimum $50,000 coverage mandate. Operating with a lapsed or expired license can result in penalties and disciplinary action from the Commission.