Maryland and most other states have laws requiring many businesses and professionals that deal with the public to be bonded — that is, to put up a specific amount of money that can be paid to injured parties if they are negligent or otherwise fail in their responsibilities to the public. Auto dealers, building contractors, mortgage brokers and freight transporters are just a few of the many types of professionals and businesses that are required to be bonded in Maryland. Although a surety bond is technically a credit instrument, not insurance, it functions similarly, and most businesses work with an insurance company to purchase a surety or commercial bond. (Ref. 6)
Research the type(s) of surety bonds required to operate your business. Visit the Maryland Department of Labor, Licensing and Regulation website to learn more about the various professional boards that regulate the licensing, bonding and insurance requirements for professionals and specific fields of business in Maryland. For example, building contractors in Maryland must post a surety bond based on the size of their business and maintain at least $50,000 liability insurance; plumbers must provide at least $300,000 liability insurance and $100,000 property insurance.
Contact a surety bond company, or an insurance company that offers them, to see about purchasing a surety bond. While there are several national surety bond companies, different states have different regulations regarding structuring of surety bond policies, and it is wise to work with someone who is very experienced with Maryland surety bonds.
Fill out an application for a surety bond and provide the insurance company with all of the personal and financial information required to determine the premium for your surety bond. Typical bond premiums are 1 to 3 percent, but can range as high as 5 to 20 percent of the bond amount.
Present your proof of surety bond when you apply to the appropriate professional board or commission in Maryland to acquire your business license. You should also keep a copy in your business files.
Building contractors will often have to put up business-related bonds related to specific projects he is involved in, but these are legally separate from the surety bond required for his license as a building contractor.
Starting a new business requires several other permits and licenses besides a commercial surety bond. At a minimum, you will need to register with the Maryland and local tax authorities and get a Maryland business operations permit.
- JW Surety Bonds: Commercial Surety Bonds - Commercial Bond Types
- Maryland Department of Labor, Licensing and Regulation: DLLR's Division of Occupational and Professional Licensing
- SuretyBond.com: License and Permit Bond
- Maryland Department of Labor, Licensing and Regulation: License - Maryland Home Improvement Commission
- Maryland Department of Labor, Licensing and Regulation: Insurance Requirements - Maryland Board of Plumbing
- JW Surety Bonds:Frequently Asked Questions (General)