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How to Become a General Contractor in Alabama

1. Introduction

For ambitious construction professionals in Alabama, a state license is the single most important asset you can possess. It is the key that unlocks your ability to run a legitimate, profitable, and scalable business. An Alabama license is more than a piece of paper; it is a declaration to the public, regulators, and clients that you have met the state's rigorous standards for professionalism, financial stability, and legal compliance. As a licensed contractor, you are a state-vetted professional entrusted with safeguarding public health, safety, and welfare.  

This guide is your definitive, step-by-step roadmap to earning that trust. We will provide a hyper-detailed plan based only on official Alabama state sources, covering everything from legal requirements and application fees to exam details and insurance.

Before we begin, you must understand the most critical aspect of Alabama's system.

Understanding Alabama’s 'Two-Board' Licensing System

The most common point of confusion for aspiring contractors is that Alabama does not have a single "general contractor" license. The license you must obtain depends entirely on the type of project you plan to build.

  1. For Commercial, Industrial, & Public Works: You must be licensed by the Alabama Licensing Board for General Contractors (LBGC). This license covers projects like office buildings, factories, highways, and municipal utilities.  
  2. For Residential Projects: You must be licensed by the Alabama Home Builders Licensure Board (HBLB). This license covers the construction, remodeling, and repair of residential structures.  

These boards are separate entities with different applications, different exams, and different rules. This guide will meticulously detail the path for both licenses, allowing you to choose the one that aligns with your business goals.

2. Understanding the General Contractor License in Alabama: Why You Need It

In Alabama, contracting without a license is not just risky—it's illegal. The state enforces strict thresholds to protect consumers and ensure a fair, professional marketplace.

The Legal Mandate: Who MUST Be Licensed?

Commercial / Industrial (LBGC): You are legally required to hold a Prime Contractor or Subcontractor license from the LBGC if the total cost of your project, including labor and materials, meets these thresholds:

  • General Projects: $100,000 or more.  
  • Swimming Pools: $5,000 or more.  

It is important to note that many outdated guides still list the old $50,000 threshold. Be aware that Legislative Act 2024-277 officially increased this minimum to $100,000, effective October 1, 2024.  

This requirement also applies to subcontractors. If you are a specialty contractor (e.g., mechanical, electrical, site work) bidding to a prime contractor, you must have your own LBGC license if your portion of the work is $100,000 or more.  

Residential (HBLB): You are legally required to hold a Home Builder license from the HBLB for the following projects:

  • General Residential Projects: Any construction, remodeling, repair, or improvement on a residential structure where the total cost (labor and materials) exceeds $10,000.  
  • Residential Roofing: This specialty has a lower threshold. A license is required for residential roofing projects where the cost exceeds $2,500.  

The Risks of Operating Without a License in Alabama

Attempting to bypass these laws can result in business-ending consequences.

  • Void and Unenforceable Contracts: This is the most catastrophic risk. Under Alabama law, a contract entered into by an unlicensed contractor working on a project that requires a license is null and void. If a client refuses to pay you for work you performed, you have no legal recourse. You cannot file a mechanic's lien or sue for payment. The law offers a complete defense to a client for non-payment.  
  • Criminal and Civil Penalties:
    • Residential (HBLB): Operating without a required HBLB license is a Class A misdemeanor. The HBLB also has the authority to issue administrative fines of up to $5,000 for each violation.  
    • Commercial (LBGC): The law is strict not only for contractors but also for those who hire them. Any owner, architect, or engineer who knowingly receives or even considers a bid from an unlicensed contractor is guilty of a Class B misdemeanor.  

Exemptions

The primary exemption is for an "owner-builder." A person, firm, or corporation constructing a building on their own property for their own use is generally exempt from these licensing requirements. However, this exemption comes with a critical caveat: if the owner-builder contracts out any portion of the work, the contractor performing that work must be licensed if the work meets the statutory thresholds.  

3. Types of General Contractor Licenses in Alabama

As established, you must apply to the correct board. Here is a detailed breakdown of the license types each one offers.

Part A: The Alabama General Contractor License (Commercial/Industrial)

Issued by the Alabama Licensing Board for General Contractors (LBGC) , this license is for commercial, industrial, and public works projects.  

License Types by Role: The LBGC issues two main types of licenses based on your contractual role:

  1. Prime Contractor: This license allows you to bid on projects and contract directly with the "awarding authority" (i.e., the client or project owner).  
  2. Subcontractor: This license restricts you to bidding or contracting only with a licensed Prime Contractor.  

Major Classifications by Scope of Work: Your license will specify the type of work you are qualified to perform. You must apply for a classification that matches your company's experience and expertise. The major classifications include:  

  • (BC) Building Construction
  • (BCU4) Building Construction Under Four Stories
  • (H/RR) Heavy / Railroad
  • (H&S) Highways & Streets
  • (MU) Municipal & Utility
  • (S) Specialty Construction (This is a broad category that includes dozens of sub-classifications like Demolition, Environmental Remediation, Landscaping, Fencing, and more).  

Financial Bid Limits by Project Value: This is the most critical component of the LBGC license. Your license is assigned a letter symbol that dictates the maximum value of any single contract you are allowed to bid on.  

Your company's financial standing is your license tier. The board determines your bid limit using a specific formula: your limit is set at "not more than ten times either the net worth or working capital, whichever is the lesser amount".  

To qualify for even the lowest classification (Bid Limit "A"), your company must demonstrate a minimum net worth and working capital of at least $10,000 on a financial statement prepared by a Certified Public Accountant (CPA). You cannot simply request an "Unlimited" license; you must prove you have the financial capacity to manage it.

Maximum Bid Limits by Letter Symbol (Single Contract)
Letter Symbol Maximum Bid Limit (Single Contract)
A $100,000.00
B $250,000.00
C $500,000.00
D $1,000,000.00
E $3,000,000.00
U Unlimited

Source: Code of Alabama 1975, § 34-8-2    

Part B: The Alabama Home Builder License (Residential)

Issued by the Alabama Home Builders Licensure Board (HBLB) , this license is for all residential work. The HBLB offers three distinct license types based on your scope of work.  

  1. Unlimited License: This is the highest-level residential license. It allows you to perform the construction, remodeling, repair, improvement, or reimprovement of any residential structure. This is the only license that permits the construction of new homes.  
  2. Limited License: This license is restricted. It only permits "repair, improvement, or reimprovement" on existing residential structures. It does not allow you to build new homes.  
  3. Roofers License: This is a specialty license limited only to the "installation or repair of the external covering of a residence or structure".  

4. Step-by-Step Guide: How to Get Your Alabama General Contractor License

This guide details the parallel paths for obtaining your commercial (LBGC) or residential (HBLB) license. Follow the steps for the board that governs your work.

Step 1: Meet the Basic Eligibility Requirements

The two boards have fundamentally different eligibility criteria.

  • LBGC (Commercial): Eligibility is primarily financial. Your company must demonstrate a minimum net worth and working capital of at least $10,000. You must also designate a "Qualifying Party" (QP). This person must be a full-time employee and is the individual responsible for passing the required examinations.  
  • HBLB (Residential): Eligibility is based on experience and ability. You satisfy this requirement in one of two ways :  
    • For an Unlimited License: You must pass the Alabama Home Builders Exam (both the Skills and Business/Law sections).  
    • For a Limited or Roofers License: You can either pass the exam or you may be exempt from the exam by providing "a copy of a business or occupational license as a contractor issued by a municipality...that you currently hold or held one (1) year prior to the date of the application".  

Step 2: Register Your Business

Your license will be issued to a legal business entity, not an individual. Before applying to either board, you must formally register your business with the Alabama Secretary of State (SOS).  

  1. Reserve Your Business Name: You must first file a "Name Reservation Request Form for Domestic Entities". This ensures your desired company name is available. The filing fee is $25 for mail-in processing or $28 for online processing.  
  2. Form Your Legal Entity: Once your name is reserved, you must file a "Certificate of Formation".  
    • Domestic LLC: The state filing fee is $200.  
    • Domestic Corporation: The state filing fee is $200.  

Step 3: Complete the License Application

With your business entity legally formed, you can now apply to the appropriate licensing board.

  • LBGC (Commercial):
    • Application: You will complete the "Prime Contractor Application".  
    • Fee: The non-refundable application fee is $300.  
    • Documentation: This is a comprehensive application. You must include your CPA-prepared financial statement , proof of your SOS business registration, verification of your Qualifying Party, and other supporting documents.  
  • HBLB (Residential):
    • Application: You will complete the "New Application Package" for the specific license you seek (Unlimited, Limited, or Roofer).  
    • Fee: The total fee is $350. This is broken down as a $100 non-refundable new license application processing fee plus the $250 annual license fee.  
    • Documentation: You must return the notarized application with the $350 fee and proof of your business-related financial requirements. This is a credit report for Unlimited/Limited licenses or a bond for a Roofer license.  

Step 4: Pass the Required Examinations

Passing a state-administered exam is a mandatory step for most new applicants.

  • LBGC (Commercial):
    • Exams Required: All new Prime Contractor applicants must pass two examinations :  
      1. Business and Law Exam
      2. A Trade Exam (this must correspond to your license classification, such as the "AL Building Construction" exam).  
    • Provider: PSI Examination Services.  
    • Costs:
      • Business and Law Exam: $96. This is typically a 50-question, 120-minute open-book exam.  
      • Major Trade Exams (e.g., Building Construction, Highways & Streets): $106.  
    • Study Materials: The primary reference for the Business and Law exam is the NASCLA Contractors Guide to Business, Law and Project Management.  
  • HBLB (Residential - Unlimited License):
    • Exams Required: Applicants for the Unlimited license must pass two examinations :  
      1. Technical Trade / Skills Exam
      2. Business and Legal Requirements Exam
    • Provider: Prov, Inc..  
    • Costs:
      • Both exams taken on the same day: $130.00.  
      • Exams taken on separate days: $80.00 per exam.  
    • Exam Details: Both exams are open-book. The Skills exam consists of 80 questions with a 4-hour time limit. The Business and Law exam consists of 40 questions with a 2-hour time limit.  

Step 5: Obtain Insurance and Bonding

You must secure the proper insurance and bonding before you can be licensed and before you begin any work.

General Liability Insurance:

  • LBGC (Commercial): Alabama state law (Code of Alabama § 34-8-2) explicitly requires all applicants to "provide proof of liability insurance" to be licensed.  
  • However, a detailed review of the LBGC's administrative code reveals that the board does not set a minimum dollar amount for this policy as a condition of licensure. The specific rule that formerly governed this (230-X-1-.32) was repealed.  
  • This means that while you must have a policy to get your license, your actual coverage limits (e.g., $1 million per occurrence / $2 million aggregate) will be dictated by your client contracts and project requirements (e.g., state public works projects mandate high-limit policies ), not by the LBGC itself.  
  • HBLB (Residential): The law regulating the HBLB "does not address insurance" as a condition of licensure. Despite this, carrying a comprehensive general liability policy is a non-negotiable cost of doing business and will be required by your clients.  

Workers' Compensation Insurance:

  • Authority: Alabama Department of Labor.  
  • Requirement: This is not governed by the contracting boards. Per the Department of Labor, workers' compensation insurance is mandatory for any Alabama business with five or more employees (full-time or part-time). If you have fewer than five employees, you are typically not required to carry it.  

Surety Bonding:

  • LBGC (Commercial): A surety bond is generally not required for licensure. However, it can be used as a financial tool. If your company's net worth or working capital is deficient for the bid limit you desire, the board may allow you to furnish a bond to "make up for any deficit".  
  • HBLB (Residential): A bond is required only for one specific license type. Applicants for the Roofers License must submit a $10,000 License/Permit Bond naming the HBLB as the Obligee. Applicants for the Unlimited and Limited licenses must submit a credit report instead.  

5. The Financial Breakdown: Costs and Timelines

Here is a summary of the core statutory fees required to get your business registered and licensed in Alabama.

Summary Table: Estimated Core Costs for Alabama Contractor Licensing

Alabama Contractor Cost Breakdown (Commercial & Residential)
Cost Item Authority Alabama (LBGC - Commercial) Alabama (HBLB - Residential)
Business Formation
Name Reservation Alabama SOS $25.00 $25.00
Entity Formation (LLC/Corp) Alabama SOS $200.00 $200.00
Licensing & Exams
Application Fee Respective Board $300.00 (Prime App) $100.00 (Processing)
Initial License Fee Respective Board (Included in App) $250.00 (Annual License)
Examination Fees PSI / Prov $202.00 (approx. $96 + $106) $130.00 (both, same day)
Bonding
Surety Bond Surety Co. (Only if financials are deficient) $10,000 Bond (Roofers Only)
Total Estimated (Core) ~$727.00 ~$705.00

(Note: These costs are statutory and subject to change. This table does not include insurance premiums, the cost of a CPA-prepared financial statement, bond premiums, or exam preparation materials.)

Realistic Timelines: A Critical Planning Factor

The time it takes to get your license varies dramatically between the two boards. This is a critical distinction for your business planning.

  • HBLB (Residential): This is a relatively fast administrative process. The HBLB states that the processing of a complete application (including application, test scores, and credit report) takes approximately 3 to 4 weeks.  
  • LBGC (Commercial): This is a much longer, strategic process. The LBGC's instructions state that a new application "has to be on file 30 days prior to a Board meeting which are held quarterly".  

This "quarterly" schedule is a major planning consideration. If you submit your application the day after the 30-day deadline for a meeting, you may have to wait over 3 months for your application to be reviewed at the next quarterly meeting. You must plan your business launch around this schedule.

6. License Renewal and Continuing Education

Obtaining your license is the first step; maintaining it is an annual responsibility. Again, the requirements are completely different for each board.

LBGC (Commercial) Renewal

  • Process: Renewal is annual. The LBGC uses a staggered renewal schedule based on the first letter of your company name. For example, companies starting with "S" renew in June, while companies starting with "A" renew in December.  
  • Fees: The annual renewal fee is $200 for Prime Contractors and $100 for Subcontractors.  
  • Continuing Education (CE): None. A thorough review of the LBGC's official rules and renewal forms shows no continuing education requirements for renewing your license.  

HBLB (Residential) Renewal

  • Process: Renewal is annual. The renewal period opens on October 1st and ends on December 31st. A renewal is considered late and incurs a $50 fee if postmarked after November 30th.  
  • Fees: The annual license fee is $250.  
  • Continuing Education (CE): Mandatory. This is a critical difference. To renew an HBLB license, all licensees under the age of 60 must obtain six (6) credit hours of Board-approved continuing education every year.  
    • Specific Requirement: At least two (2) of these six hours must be from an "Alabama specific course".  

7. Out-of-State Contractors: Reciprocity in Alabama

Alabama offers a path for licensed out-of-state contractors, but "reciprocity" is often misunderstood. It is not a license swap. It is a partial waiver of examination requirements.

For both boards, all out-of-state applicants must still pass the Alabama Business and Law Exam. Reciprocity only waives the trade or skills portion of the exam.  

LBGC (Commercial) Reciprocity

  • States: Arkansas, Louisiana, Mississippi, North Carolina, and Tennessee.  
  • Waiver: Waives the Trade Exam only. Applicants must still pass the Business and Law exam, submit a full application, and meet all financial requirements.  

HBLB (Residential) Reciprocity

  • States: Louisiana, Mississippi, North Carolina, South Carolina, and Tennessee.  
  • Waiver: Waives the Skills Exam only. Applicants must still pass the Business and Law exam and submit a full application.  

8. Growing Your Business with Billdr.ai

Earning your Alabama license is the first step. The next is connecting with high-quality clients and building your project pipeline. Billdr.ai connects certified, high-quality general contractors with vetted residential renovation projects, helping you build your reputation and grow your business in Alabama.

9. Frequently Asked Questions (FAQ)

1. How long does it take to get a general contractor license in Alabama? This depends entirely on the license. For a residential (HBLB) license, processing takes approximately 3 to 4 weeks after all documents (application, test scores, credit report) are received. For a commercial (LBGC) license, it can take 2 to 4 months. Your application must be on file 30 days before a board meeting, and the board only meets quarterly.  

2. What is the cost of a general contractor license in Alabama? The initial core costs for state registration, application, and exams are typically between $700 and $750. This includes the $200+ SOS business registration fee , a $300 (LBGC)  or $350 (HBLB)  application/license fee, and exam fees ($130 for HBLB  or $202 for LBGC ). This estimate does not include insurance premiums, bond premiums, or the cost of a CPA-prepared financial statement.  

3. Can I be a general contractor in Alabama without a license? No. It is illegal to perform or bid on any commercial project valued at $100,000 or more  or any residential project valued at $10,000 or more  without the proper license. The penalties are severe: your contracts will be considered null and void, making it impossible to collect payment , and you can face Class A or B misdemeanor charges.  

4. What's the difference between a General Contractor and a Home Builder license in Alabama? They are two completely separate licenses from two different state boards. The "General Contractor" license is issued by the LBGC and is for commercial and industrial projects over $100,000. The "Home Builder" license is issued by the HBLB and is for residential projects over $10,000.  

5. How do I perform an Alabama general contractor license search? You must search on the correct board's website.

  • Commercial (LBGC): Use the "License Roster Search" on the LBGC website. Be aware: the LBGC's own disclaimer states this online roster is "NOT OFFICIAL." For legal verification, you must contact the board directly at (334) 272-5030.  
  • Residential (HBLB): Use the official "Licensee Search" portal on the HBLB website.  

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