Texas Bonding, Insurance & Business Requirements
With no state license dictating uniform bonding and insurance, a Texas general contractor's obligations flow from local ordinances and from the private contract. This chapter reviews where those requirements come from and how to stay compliant.
Where insurance and bonding requirements originate
Because the state imposes no general contractor bonding or insurance rule, requirements come from two main places. First, local governments: a city may require proof of general liability insurance and sometimes a permit or license bond as a condition of registration or of pulling permits. Second, the private contract: owners and lenders typically require the contractor to carry commercial general liability coverage, workers' compensation or approved occupational injury coverage, and sometimes performance and payment bonds on larger jobs.
Workers' compensation is optional but consequential
Texas is the only state that does not generally mandate that private employers carry workers' compensation insurance. A contractor may choose to go without it, but doing so exposes the business to negligence lawsuits from injured workers and often disqualifies the contractor from jobs where owners or general contractors require coverage. Many project contracts therefore require workers' compensation even though the state does not.
Business formation and taxes
Like any Texas business, a contracting company should choose an appropriate legal structure (sole proprietorship, LLC, corporation), register with the Texas Secretary of State when applicable, and comply with the Texas franchise tax and sales/use tax rules on materials. These general business obligations apply regardless of the absence of a contractor license.