Become a Licensed Contractor in Arizona

by Murphy Cordier Casale Axel PLC | 06/14/2021 | News

The Arizona Registrar of Contractors (“AZ ROC”) now boasts on its website the ability for an applicant to get “licensed in a day.” This new page says if an application is submitted properly without any faults, it is “possible” for the application to be approved within one business day. While it boldly claims the process can happen in a day, it is only a possibility, and it requires a perfect application. Of course, a perfect application is easier said than done, especially when dealing with tiered entities.

To help make the possibility a reality, AZ ROC provides a series of videos designed to point out common mistakes made by applicants. This article will discuss who needs a license, provide the information contained in the videos, and dive into some of the tiered entity requirements. For reference, the “Qualifying Party” is the person who is responsible for a licensee’s actions and conduct performed under the license and has an ownership interest in the license or is regularly employed by the licensee.

Who needs a license?

While someone who installs a pool would obviously need to be licensed, Arizona’s Legislature kept the definition for “contracting” incredibly broad. The definition states that any person or entity, “that, for compensation, undertakes … submits a bid or responds to a request for qualification or a request for proposals for construction services to, does himself or by or through others, or directly or indirectly supervises others to … construct, alter, repair,” is a contractor. Anyone who provides a quote for construction is deemed a contractor for licensing issues. If you plan on building, altering, or repairing something for payment, you will need to be licensed. However, low volume work (less than $1,000, including labor, materials, and all other items) or improving one’s own property is not considered contracting.

The importance of being licensed cannot be understated; the penalty an unlicensed contractor faces if caught is serious. Under A.R.S. § 32-1151, it is illegal to work as an unlicensed contractor. If a person is found to be contracting (again, a very broad term) without a license, AZ ROC, in its discretion, may withhold issuing a license for an entire year. Not only is it easy to be considered a contractor, but the penalty for contracting while unlicensed, even if unintentional or harmless, is steep.

Common Application Mistakes

The application has many requirements, and it is easy to miss something. Each “Licensed in a Day” video is targeted towards a specific application requirement. This section will cover each of those requirements and the mistakes that are associated with them.

Bonds

The bonds that are required for the application are surety license bonds. There are no exemptions for the bond requirement unlike other application materials. AZ ROC states that roughly 50% of mistakes found in recent applications involved the bond requirement. The bond’s particular form must meet all the following requirements:

The bond’s number must be stated on the application.
The full legal name of the business entity is listed. This includes a DBA (“Doing Business As”) trade name if one is used. If the business entity is an LLC or is incorporated, this designation must be noted. A DBA name does not include this designation (See, Image 2). For a sole proprietorship or partnership, the name of the business entity is the name of the sole proprietor or partners as shown on the government identification (the “ID”) submitted with the application.
The License Classification being applied for and its respective definition must be stated completely. For example, a carpentry license for both residential and commercial construction has a “CR-7” classification and its definition is “Carpentry.” Thus, your application must list “CR-7 Carpentry.”
The bond must be worth at least the minimum required by AZ ROC. The License Classification and the applicant’s estimated annual volume alters the minimum required bond value. To find the minimum required, go to the “Licensing” tab on the AZ ROC website and click on “Bond Information” or click here. The “Bond Information” page provides a table that shows the type of license, an estimated volume of work and the respective minimum bond amount. If you are applying for both commercial and residential licensing, both bond amounts will need to be listed on the application. Further, the two bond amounts must be clearly separated as depicted below in Image 2 with some of the other requirements previously stated.
The bond’s effective date must be within six months of the application being received by AZ ROC. If the effective date is beyond that six-month period, an applicant will need to contact the bond company (the surety) and obtain a “Full Force and Effect” letter from them to prove the bond is still in effect. If the effective date is in the future, the license will not be issued until that future date so do not use a future date if you want to be licensed in a day.

Overall, the bond form has many particular requirements but meeting them is far from impossible. It is really a restatement of information an applicant should already know. The only difficult portion is making sure an applicant gets the minimum amount required for the bond, and even then, AZ ROC provides an easy table to help figure out what that amount is. If an applicant does not want to post a bond, a cash deposit of the same amount can be made to the State Treasurer.

Experience

Any applicant must have experience in the desired field for which they are applying for a license. An applicant’s listed experience must be specific to the license; think of it as tailoring a résumé for a specific job. For example, if applying for an R-14 Fencing License, tiling experience would not be relevant. An applicant unsure of what is relevant can visit the License Classification Page to see a description of what each license covers; the applicant should list experience that matches what is listed.

Most licenses require proof of a certain number of years of experience as part of the application. To find out if a license requires proof, check the License Classification Requirements Form. It provides each License’s requirements including experience and necessary exams (discussed later). If years of experience are required, two of those years must have been within the past 10 years.

AZ ROC provides two alternative ways to help satisfy the experience requirement. First, certain licenses can have their experience requirement completely or partially satisfied by taking a trade exam. If an applicant has taken a trade exam, the score will need to be included in the application. The License Classification Requirements Form lists what licenses can be affected by trade exams. The second pathway for some licenses allows technical training, military service, diplomas, or certifications as a potential substitute for part of the experience requirement. An applicant must submit supporting documentation of this, and it can be used to supplant up to two years of experience. The full requirements are listed here.

Experience Waivers

In certain instances, the mandatory years of experience can be waived. For experience to be waived, the Qualifying Party must meet or exceed the license classification requirements and must be licensed in Arizona or another state. Specifically, if the Qualifying Party was the Qualifying Party on a similar Arizona license in good standing or on an active, comparable license in good standing in another state, then a waiver may be requested. The waiver is requested in the prior experience section of the application.

This section will ask the applicant to list previous experience. It is important to add as much information as possible. Further, the other license you are using as the basis for the waiver must be “comparable” to the one being applied for. Therefore, a tiling license will not let you waive the required experience for a fencing license.

Personal Identification

ID must be provided for every person that will be named on the license. A person is required to be on the license if they are listed with the Arizona Corporation Commission (such as a Director, Treasurer, President, etc.) or has a 25% or more ownership stake in the company. If the business entity is an LLC and “Member-Managed,” all members should be listed. If the LLC is “Manager-Managed,” then every manager should be listed.

A list of acceptable forms of ID can be found here. When submitting a copy of the ID(s), make sure it is current and not expired on the day that the registrar receives the application. The copy should be clear and legible and must be an ID that includes a photograph.

Background Checks

Current background checks are required for every person that will be named on the license (See, previous section for who must be listed on the license). Background checks are only “current” for 90 days. If the 90-day window has passed, another background check will be required for the applicant.

To order a background check, click here or follow along with Image 4. Once the fee is paid, an applicant will receive a “Payment Transaction Receipt.” If you are filing the application on paper, submit a copy of the payment transaction receipt for every person named on the application. If filing electronically/online, insert the “Profile ID Numbers” and “Order Date” listed on each person’s payment transaction receipt.

Exams

An exam score or waiver request (discussed later) must be submitted with the application. The two primary exams are the trade exam and the Statutes and Rules Exam (the “S&R Exam”). trade exams are focused on the particular craft covered under the scope of the license. For example, if you are applying for a tiling license, the trade exam will involve the intricacies of tiling rather than fencing. The S&R Exam covers some of the statutes and rules that govern being an Arizona Contractor. This exam is not particularized for a specific license. The Qualifying Party must satisfy the examination requirements. The License Classification Requirements Form lists the required test(s) for each license. The circle in the above photo shows that the A-12 Sewers, Drains and Pipe Laying license requires both a trade exam and S&R exam (AZ ROC abbreviates them as “T” and “SRE” respectively). To schedule an exam or ask questions about the process, click on the PSI (the testing company) link in the form or click here.

While the trade exam is not required for every license, the S&R Exam is always required unless a waiver is granted. The Qualifying Party must pass any and all exams before submitting the application. An applicant must submit the exam scores with the application. Exam scores are good for exactly two years from the day the test is taken. If the Qualifying Party’s score is expired, they are required to retest.

Exam Waivers

Exam waivers can be obtained by an applicant, but the process is different depending on if they are already licensed in Arizona or if they are licensed outside of Arizona. AZ ROC will waive the S&R Exam requirement if the Qualifying Party was the Qualifying Party on a license in Arizona within the past five years. Further, the trade exam will be waived if the Qualifying Party was the Qualifying Party on an Arizona License of the same license classification within the last five years. The Trade Exam Waiver Form and S&R Exam Waiver Form can be accessed here and here respectively.

For Out-of-State Applicants (“OOS Applicants”), the process is more intricate. An OOS Applicant is someone who has never been named as a Qualifying Party in Arizona. If someone is an OOS Applicant, they will be required to pass the S&R Exam; it is specific information pertaining to Arizona’s statutes and rules. However, the trade exam may be waived if the Qualifying Party was the named Qualifying Party on a comparable license in another state within the last five years. The comparable license must have a similar scope to the desired Arizona license like the experience waiver requirement. The waiver form can be found here. The Qualifying Party completes Sections A and B of the form. After that, the Qualifying Party will send the form to the agency or board (the “OOS Licensor”) that issued the out-of-state license. The OOS Licensor will complete Sections C and D and then return the form to the Qualifying Party. The completed form will be a part of the submitted application to AZ ROC. The form will be verified when AZ ROC reviews the application. If not verified, the Qualifying Party will be contacted, and they will be required to pass the respective trade exam. When waivers are denied, it is usually because the license was not actually comparable, or the Qualifying Party was not the Qualifying Party on the out-of-state license.

Tiered Entities

A tiered entity is an entity that is owned or operated by another entity. There is an additional application requirement for these entities. AZ ROC requires the entity to submit an organizational chart of the entity showing each tier. An instruction sheet and example can be found here. The chart must list the name and address of any person who owns 25% or more of the corporation, the document must be signed and state that, “No person or entity, other than those listed, owns 25% or more of the applicant,” and ownership percentages must be shown. Tiered – entity applications can be complicated depending on the applicant’s ownership structure. AZ ROC may request additional information relating to the ownership – entity tiers. Tiered entity applications are most likely to take longer than a typical application because of the additional entity information AZ ROC will review.

Conclusion

Getting “licensed in a day” is dependent on the applicant and AZ ROC, but the onus is on the applicant. A perfect application is mostly a recitation of information the entity should already know; however, complying with every requirement that AZ ROC demands is the hard part. Hopefully, this article helped clarify some of the application requirements while pointing out common pitfalls.

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