How to Become a Licensed Contractor in Arkansas: Exams, Bond, and Fees

To become a licensed contractor in Arkansas, you apply to the Arkansas Contractors Licensing Board, choose a classification that matches the work you plan to do, prove your experience and finances, post a $10,000 surety bond, and pass the state Business and Law exam. A license is required before you take on commercial projects worth $50,000 or more, or residential projects worth $2,000 or more.¹² The board rejects incomplete applications and keeps your filing fee either way, so the goal is to submit a complete package the first time.

When You Need a License

Two dollar thresholds decide whether you need to be licensed at all. On the commercial side, any project other than a single-family residence that reaches $50,000 in combined labor and materials requires a commercial contractor license. That covers apartments, condominiums, highways, utilities, and public-access structures.¹

On the residential side, the threshold drops to $2,000 and applies to single-family homes and multi-family buildings with four or fewer units.² Splitting one job into a series of sub-$2,000 contracts to duck the requirement is not allowed.

Subcontractors working under a licensed general contractor don’t need their own full license, but they do need to register with the board. Registration requires a $100 filing fee, a $10,000 surety bond, and, if the trade requires a state license or certificate (electrical, plumbing, and the like), the underlying trade credential must be in place first.³ Operating as an unregistered subcontractor carries the same penalties as unlicensed contracting.

Choose Your Classification

Arkansas splits licenses by project type and by dollar value, and picking the wrong classification is a common reason applications stall. On the commercial side, the classifications include general building (no project cap), light building (projects under $750,000, two stories or fewer), heavy/highway/railroad/airport, municipal and utility, mechanical, electrical, and specialty.

Each classification carries a minimum net worth requirement that your financial statement has to support. General building, heavy, highway/railroad/airport, and municipal/utility each require a $50,000 minimum net worth. Light building, mechanical, and electrical each require $20,000. Specialty licenses require $5,000.⁴ Only business-related assets count; personal property you don’t use for the business doesn’t.

Commercial licenses also come in two tiers, unrestricted and restricted. The difference is not what you can build but how thoroughly your finances are examined: unrestricted licenses require an audited or reviewed financial statement, restricted licenses accept a compiled statement.⁵

On the residential side, builders handle new construction and remodelers work on improvements or additions. A residential builder must show four years of verifiable construction experience; a residential remodeler needs two. Passing the appropriate trade exam can substitute for part of the experience requirement in either case.⁶

Name a Qualifying Party and Line Up Your References

Every application has to designate a qualifying party. That person is responsible for the company’s day-to-day construction operations and has to be a sole owner, partner, officer, member, or full-time employee who has passed the Business and Law exam.⁵ Listing someone with no real involvement in operations is not permitted.

You also need three written references from people who know your work firsthand: former employers, architects, engineers, or material suppliers are typical. The board contacts references during review, so make sure the phone numbers and email addresses you submit are current.

Financial Statement, Surety Bond, and Insurance

Commercial applicants must submit a financial statement prepared by a licensed CPA or public accountant. Unrestricted licenses require an audited or reviewed statement; restricted licenses require at least a compiled statement.⁷ The statement has to show that your business meets the minimum net worth for the classification you’re asking for.⁴

Every commercial contractor and registered commercial subcontractor also has to file a $10,000 surety bond. The bond has to be issued in the name and EIN of the business entity, not in an individual’s name.⁸ It protects the public in the event that you violate licensing law or fail to meet your contractual obligations.

Insurance is the third piece. Arkansas generally requires workers’ compensation for employers with three or more employees, though exceptions can pull in smaller employers.⁹ The board’s own application forms, however, ask for proof of workers’ compensation coverage from any applicant with one or more employees.³ If you have any employees, plan on producing that documentation. Contractors working on state-owned buildings or other public projects also need commercial general liability coverage of at least $1,000,000 per occurrence and $2,000,000 aggregate; subcontractors on those jobs carry similar coverage. Private-sector owners often set their own liability minimums as a condition of getting on site.

Pass the Business and Law Exam

Every applicant has to pass the Arkansas Business and Law Examination. PSI administers the exam at test centers across the state, Monday through Saturday. You register online after the board approves your initial application and sends instructions.¹⁰

The exam is 50 multiple-choice questions, two hours, open-book. The only reference allowed is the Contractors Guide to Business, Law and Project Management, Arkansas Edition, which you order directly from the publisher. You can highlight, underline, and add permanent tabs before the test, but you cannot write in the book during the exam, and Post-it notes and removable tabs are not permitted. The exam covers Arkansas labor laws, tax requirements, and contract management. Passing is 70 percent.¹⁰

PSI gives you your score at the end of the test, but getting that score to the board is on you. Faxing the report to the board’s office is the fastest route; asking PSI to mail it can add weeks to your approval. The exam fee is $84, paid to PSI, and it’s non-refundable. Bring a government-issued photo ID and your reference book, and arrive 30 minutes early.¹⁰

Submit Your Application and Fee

Applications go to the board’s office in Little Rock. Pay by check or money order; the board does not accept cash. Filing fees are:

Commercial contractor, new application: $100, non-refundable.¹¹
Residential home improvement, new application: $50, non-refundable.¹²
Commercial subcontractor registration: $100, non-refundable.³

An incomplete package gets returned and the fee is not refunded, so verify the qualifying party, the three references, the financial statement, and the bond before you mail anything.

Board Review and Temporary Licenses

Once your exam score reaches the board, your file moves into final review. Board members meet regularly, and approval typically takes three to five weeks. The certificate is valid for one year from the date of issuance.¹³

If you can’t wait, the board offers a 90-day temporary commercial license. It’s available to applicants who already hold a current contractor license in another state, or who can provide three signed reference forms showing relevant experience. The temporary license still requires the $100 filing fee, the $10,000 surety bond, and the applicable financial statement.¹⁴ Any work started under a temporary license has to finish inside the 90 days or roll onto a full license before the temporary one expires. A temporary license cannot be renewed, reapplied for, or reinstated after it lapses.

If You’re Licensed in Another State

Arkansas has reciprocal licensing agreements with Tennessee, Mississippi, Alabama, Louisiana, and North Carolina.¹⁵ Applicants coming from those states can use the reciprocal process rather than starting from scratch, and the North Carolina agreement is narrower in scope than the others.

More broadly, any out-of-state applicant who holds a substantially equivalent license in good standing does not have to demonstrate experience to Arkansas and can receive a 90-day temporary license while the file is processed. Military service members, veterans, and their spouses get a stronger benefit: if they hold a license from any state with a similar scope of practice, Arkansas waives both the experience requirement and the exam.⁶

Penalties for Working Without a License

Arkansas treats unlicensed contracting as a criminal offense. Performing commercial work worth $50,000 or more without a license, or even submitting a bid for it, is a Class A misdemeanor.¹⁶ That carries up to one year in jail per offense.¹⁷ Each day of unlicensed activity counts as a separate offense.

On top of the criminal exposure, the board can impose civil penalties of $100 to $400 per day, capped at 3 percent of the total project cost.¹⁶ On a $500,000 job, that cap alone is $15,000. The same civil penalties apply to residential work above the $2,000 threshold when the contractor isn’t licensed.

Keeping the License Active

The license expires at midnight on its expiration date, one year after issuance. The board mails renewal notices about 60 days out, but not receiving one is not a defense for missing the deadline. Renewal fees are set by the board and capped at $100.¹⁸¹³

If your renewal arrives more than 30 days after expiration, a $100 late fee applies and the board has to review your application at its next meeting before your license is valid again. You can renew a lapsed license up to two years after expiration; after that, you start over with a new application. Active-duty military personnel deployed outside Arkansas keep a valid license until 180 days after their return.¹³

1
Arkansas Department of Labor and Licensing. Commercial Contractors Licensing Law Statutes and Rules
2
Arkansas Department of Labor. Arkansas Residential Contractors Licensing Law and Rules
3
Arkansas Contractors Licensing Board. Subcontractor Registration Commercial
4
Code of Arkansas Rules. 17 CAR 255-401 – License Requirements Minimum Net Worth
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Arkansas Contractors Licensing Board. Commercial Rules and Regs Jan 2025
6
Arkansas Department of Labor. Rules of the Residential Contractors Committee – Revised January 2025
7
Justia. Arkansas Code 17-25-304 – Financial Statement – Surety Bond
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Arkansas Contractors Licensing Board. $10,000 Surety Bond
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Arkansas Department of Labor and Licensing. Basic Facts
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Arkansas Department of Labor. Arkansas Business and Law Test
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Arkansas Department of Labor and Licensing. Commercial New Application
12
State of Arkansas Contractors Licensing Board. Home Improvement Specialty New Application
13
Legal Information Institute. Contractors Licensing Board Rules
14
Arkansas Contractors Licensing Board. Temporary Commercial Licensing Application
15
Arkansas Department of Labor. Reciprocal Form Instructions
16
Justia. Arkansas Code 17-25-103 – Penalties – Enforcement
17
Justia. Arkansas Code 5-4-401 – Sentence
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Justia. Arkansas Code 17-25-303 – Application – Renewal – Fees