In Delaware, all contractors must hold an active business license that gives them the legal right to complete contracting work worth over $50,000. There are state applications for both DE residents and non-residents. You may also be required to apply for an additional business license within your city.
This article will go through the business license application so that you can quickly learn how to become a contractor in Delaware.
Do You Need a Contractor’s License in Delaware?
Delaware does not offer specific contractor licenses. As opposed to generally monitoring contractor work, DE is more concerned with the registration and taxes related to your contracting business.
It requires all contractors to complete a resident or non-resident contractors package. This package assists you in applying for your business license, which will permit you to work as a contractor in the state. Contracting work includes any projects valued over $50,000.
If you plan to work on smaller projects, you will still need to register your business in DE and ensure you hold all necessary insurance (liability, Worker’s Comp, etc.).
Delaware Resident Contractors Package
DE resident and non-resident contractors packages can be found on the Division of Revenue website. The application is called a Combined Registration Application and it will grant you:
- A business license
- Tax Tips for the activity of your business
- Personalized business tax forms
When applying for your business license, you will need to include:
- Department of Labor Form UC-1
- Industrial Accident Board Form
- Division of Revenue Form 5060, if hiring subcontractors
- Proof of payment for unemployment insurance
- Proof of Worker’s Compensation
- What type of business license you want (sole proprietorship, partnership, corporation, limited liability company, limited liability partnership, etc.)
Non-residents will also need to hold a contractor license bond that is equal to at least 6% for all contracts exceeding $20,000 (or for a total amount of $20,000+ in one year via 2 or more contracts).
The annual fee for a contractor’s business license is $75. You must pay into unemployment insurance and report any new hires once your business is underway.
Once you have your business license, you may also have to get additional state licenses depending on your contracting work. Electricians, plumbers, and HVACR contractors should see this page for more information on additional licensing requirements.
Delaware Business Registration for Small-Job Contractors
If you’re only working on projects valued under $50,000 (including labor and materials), you are not required to complete the Combined Registration Application. Instead, you can register your business online and receive your business license shortly thereafter.
First, you’ll need to determine if you need an Employer Identification Number (EIN). Also called a Federal Tax Identification Number, the EIN identifies business entities for the Internal Revenue Service (IRS). Check out the IRS EIN webpage for more information.
Next, you’ll use DE’s online system to get your business license from the Division of Revenue, showing proof of unemployment payments and Worker’s Comp, if applicable. For more information on this process, see here.
Additional Local Requirements for Contractors
Some cities, such as Dover, require contractors to apply for a city-wide business license after acquiring their state license. Always check the municipal requirements before beginning contracts in a new city.
