Bonding an LLC
Forming your LLC does not require a bond; however, the type of business your LLC operates may have bonding requirements imposed by law or private contract. For example, an LLC operating as a construction business may be legally required to obtain a bond as a condition of receiving a state contractor's license. The same LLC may also be required as part of a construction contract to obtain a bond that guarantees the contract will be completed. To obtain any type of bond, your LLC must meet a bonding company's requirements, which generally include acceptable finances, sound organizational structure and good business references.
Search for a company that writes the kind of bond that your LLC must obtain. In general terms, your LLC will either need a surety bond or a fidelity bond. A surety bond is typically used to guaranty performance of a contract, such as a bid bond, payment bond or performance bond. A fidelity bond is used to cover a loss that is the result of fraud, dishonesty or violation of a statute, such as a license bond required by a government agency. Information about qualified bonding companies can be obtain through a state's department of insurance, the U.S. Department of Treasury or a licensed insurance broker or agent.
Obtain and complete a bonding company's application to begin the prequalification process to obtain a bond. Each company will have its own requirements but, in general, you should expect to give documents and information to the company so that it can complete a background check to determine if your LLC is performing its current obligations and has the financial ability to meet its future obligations. You can expect the company to investigate public records for adverse information about your LLC, such as court judgments and unpaid tax liens.
Submit information to the bonding company regarding your LLC's business operations, including a current business plan, company organizational chart, evidence of a business line of credit and overall history of your LLC's activity in its industry. Additional information can include a highlight of significant business accomplishments and letters from reputable persons in your LLC's industry that can attest to the quality of your LLC's business.
Provide the bonding company with requested financial information for your LLC, such as a year-end financial statements and an audited financial statement prepared by a certified public accountant.
Things You Will Need
Company organizational chart
Audited financial statements
Letters of recommendation
You should expect the bonding company to insist that your LLC and all of its principal owners sign an indemnity agreement that protects the bonding company from a claim made against the bond. This is standard practice in the bonding industry.