License and Permit Surety Bonds, Explained

No matter your industry, there’s probably a license or permit you need before you can start operating. But even prior to obtaining the license, you often have to procure a license and permit surety bond. We know it sounds confusing, but with our ultra-simple guide, you’ll understand the details in no time. 

Let’s begin by defining license and permit surety bonds as a whole.

 

What Are License and Permit Surety Bonds?

Many federal, provincial, and municipal government entities in Canada necessitate businesses to require the correct licenses and permits before operating. While running the business, you must stick to the terms and conditions set forth by the licenses and permits you acquired.The same government bodies will often require you to post a bond. Why? Because it acts as a guarantee that you’ll continue to adhere to the terms of your permit or license.

The market is filled with a variety of these surety bonds. But, the most commonly requested are as follows:

You can find out more about them in the next section.

 

Who Needs a License and Permit Surety Bond?

Below, you’ll discover 21 standard license and permit surety bond types:

 

#1 Auctioneers License Bond

Anybody operating or acting as an auction sales business must follow the rules set out in the auctioneer’s license. But to obtain a license, you need to post a bond in most provinces (including Alberta and New Brunswick).

The bond amount varies from province to province. For example, in New Brunswick, you need to purchase a $1,000 bond, but in Alberta, a minimum bond of $25,000 is required.

 

#2 Bailiff Bond

As per Canadian law, any business or individual that recovers money owed by people or companies, including debt collection agencies and bailiffs, must obtain a license.

The bond has two purposes:

  1. Symbolizing you have the qualifications necessary to obtain licensing
  2. Guaranteeing that you’ll abide by the statutes and laws governing bailiffs

The minimum amount for a bailiff bond is $10,000, or the gross amount you’ve collected in the last 12 months.

 

#3 Brewer’s and Wort Manufacturer’s Excise Duty License Bonds

If you are licensed under the Excise Act and are also permitted to manufacture wort, you need to acquire a brewer’s and wort manufacturer’s excise duty license bond. However, if you’re not licensed to manufacture wort but still licensed under the Excise Act, you only need a brewer’s excise duty license bond.

 

#4 Spirit License Bond

A spirits license allows you to package, product, import, denature, possess, export, and transport in bulk spirits in Canada.

When you apply for a spirits license, you must post security to the Canada Revenue Agency. To do this, you can buy a bond from one of the leading specialist providers for no less than $5,000 and no more than $2 million.

 

#5 Tobacco License Bond

In order to manufacture tobacco products in Canada, you need to obtain a tobacco license from the CRA.

As per paragraph 5(1)(b) of the EDM2-2-2 Security Requirements for Certain Licenses and for Prescribed Persons Importing Tobacco Products, you must provide a security bond equal to at least $5,000 within your license application.

Similar to the spirits license, it cannot surpass $2 million. But it must be enough to cover the amount of duty payable on the excise duty for any fiscal month.

If you require excise stamps under the regime set out in the Excise Act, you also need a tobacco excise license bond.

 

#6 Cannabis License Bond

To legally manufacture, package, label, or import cannabis and cannabis products, you need a license.

Under the most recent legislation, licensed manufacturers and cultivators must provide a minimum of $5,000 and a maximum of $5 million in security. The amount should be large enough to cover all duties owed if you become insolvent.

Many businesses in this field opt to provide security as a surety bond. Otherwise known as a cannabis excise bond, it allows you to obtain your license without risking cash assets. Plus, it comes with a relatively low premium compared to letters of credit.

 

#7 Electrical Contractors Bond

Most provincial safety authorities require all electricians to hold an industry-specific license. Alongside that, many need an electrical contractor bond to gain approval for the license.

While all provinces differ, $10,000 is the general security amount required under the bond. It’s essentially a three-part agreement ensuring:

  • You’re backed by a surety company.
  • You’ll comply with the Safety Standards Act.

 

#8 Freight Broker Bond

Also known as a BMC 84 surety bond, freight broker bonds are required by the Federal Motor Carrier Safety Administration in an amount equal to $75,000 USD. Even if your headquarters are located in Canada, you need this bond if you plan to operate in the United States of America.

It guarantees payment for your motor carriers if you fail to solve a money-related dispute. The surety company pays the carrier and requests the amount paid from you.

 

#9 Fuel Tax Bond

A fuel tax bond is a form of surety bond required by anybody that sells fuel in Canada. You’ll need it to receive the necessary licenses and permits because it guarantees you’ll pay the relevant fuel taxes.

The bond protects your province and clients. So, if you don’t pay taxes when mixing, selling, or distributing fuel, governing bodies can claim against your bond.

 

#10 Grain Dealer Bond

Under the Canada Grain Act, the corresponding Commission can request security based on your provincial grain dealer-related regulations. The security amount must cover all duties as written in the Canada Grain Act and Canada Grain Regulations and is determined by the Commission on a per licensee basis.

Bonds tend to be the most affordable way to supply security. We can connect you with a licensed bonding company guaranteed to make the entire process as smooth and navigable as possible.

 

#11 General Surety Bond (Alberta Only)

The Alberta government implemented a general surety bond to ensure businesses within certain industries comply with the various license requirements.

You’ll need this bond if you are involved in one of the following:

  • Action sales
  • Collection agents
  • Debt repayment agencies
  • Employment agencies
  • Direct sellers
  • Electricity markets
  • Fundraising
  • Home inspection
  • Natural gas
  • Payday lenders
  • Retail home sales
  • Prepaid contractors
  • Point-based contractors
  • High-cost credit providers

 

#12 Highway Transportation Bond

Canada requires a few bonds for bond freight forwarders, bonded warehouses, and highway carriers. They ensure you account for applicable duties and taxes, and goods in transit.

Bonded highway carriers are responsible for securing a bond amount of at least $5,000 but no more than $25,000. For air, marine, and rail carriers, the maximum changes to $1 million.

 

#13 Motor Vehicle Dealer Bonds

Before securing your license as a car dealership, you need to purchase a motor vehicle dealer bond to protect your customers from misrepresentation or fraud.

With that said, not all Canadian territories require this bond. To check, visit the Ministry of Transportation or the DMV website.

 

#14 Private Investigator Bonds

You must get a private investigator bond before obtaining your license. The reason behind the license and bond is to protect the public by ensuring you follow all necessary ordinances, rules, and regulations.

The bond amounts change depending on your province. But we can recommend the right bonding options after you fill in our request form.

 

#15 Road Cut Bonds

Several municipalities require contractors to acquire road cut bonds before they alter road-related assets, including the roads themselves, sidewalks, and curbs.

The bond guarantees you will restore them to their original condition once you’ve completed the work. It also protects consumers and ensures compliance with all codes of conduct.

Depending on the job you’re employed to do and the municipality, you may need a sewer tapper bond as well.

 

#16 Real Estate Broker Bonds

Prior to applying for a real estate license, you’ll need to get a real estate broker bond. It proves you’ll comply with the requirements of the license and manage trust funds properly.

The security amount levels change depending on your province. For example, in Newfoundland and Labrador, you need a bond of $15,000, but in Prince Edward Island, you only need a bond of $5,000.

 

#17 Contractor’s License Bond (Quebec)

In Quebec, all contractors must procure a contractor’s license bond. It protects your customers by giving you the ability to compensate them should they suffer damage due to your construction work.

As for the bond amount, it ranges from $20,000 to $40,000.

 

#18 Quarry Permit Bonds

Some provinces require miners and other individuals to get a quarry permit bond. The permit ensures you stick to the conditions of your license or permit to work in the quarry.

These days, such permit bonds are easier to procure. But to make it even simpler, you can use ConstructionBond. Our highly skilled team will connect you directly to a bond provider specializing in the reclamation and quarry industry.

 

#19 Direct Sellers Bond

The Canadian Direct Sellers Act necessitates those conducting door-to-door sales or similar sales methods to offer a bond, guaranteeing they practice the sales in accordance with the Act’s regulations. Most provinces require at least a $5,000 direct sellers bond.

 

#20 Travel Agent Bonds

Quebec, Ontario, and British Columbia have different travel agent bond and licensing requirements as outlined below:

  • Quebec — $25,000 bond amount, $70 for Travel Agency Managers Exam
  • Ontario — $10,000 bond amount, $3,000 application fee
  • British Columbia — $15,000 bond amount, require a branch office travel agency license

 

#21 Telemarketer Bonds

Telemarketers are required to obtain bonds to ensure they abide by the provincial and territorial industry laws. The bond also protects consumers against fraud and similar violations.

You can benefit from lower telemarketer bond premiums if you have a decent credit score. However, if your score has decreased recently, you may need to pay between 5% and 15% of the total bond amount. Get in touch with us at ConstructionBond to ensure you get the best rates!

 

How Much Does a License and Permit Surety Bond Cost?

Generally speaking, government agencies ask for small bond amounts — often under $50,000 — to cover the necessary obligations. Thanks to the low amounts, they rarely exceed $500 per year and could go as low as $200, depending on the class and size of the bond needed.

 

License Bonds That We Most Commonly Provide:

 

 

Why Choose ConstructionBond?

  • Choice — We work with countless leading surety companies to afford you the choice you deserve.
  • Ease — You fill in our quick form, and we do the hard work! Once we’ve assigned a bond provider, they’ll get in touch to guide you through the application.
  • Transparency — Gone are the days of unclear communication. We ensure that getting a license and permit bond is as simple as can be by using transparent, easily understood language.

 

Frequently Asked Questions

 

What Are The Benefits of Obtaining a License and Permit Bond?

The three main benefits of getting a license and permit bond are as follows:

  • Protect your customers — A license bond protects your customers by guaranteeing you’ll fulfill your obligations. Depending on your industry, it means you agree to work as described by government regulations, preventing the likelihood of financial loss for all parties.
  • More easily attract new customers — Businesses or individuals holding the necessary licenses and permits look more attractive to clients, especially when it comes to construction. Clients often run extensive background checks on contractors before hiring. Thus, having a license and certificate number allows you to stand out from the crowd.
  • More qualified than non-licensed businesses or individuals — Depending on your industry, attaining a license or permit bond comes with special training that ensures you can do a particular job. Therefore, you become more qualified than your competition.

 

What Other Types of Surety Bonds Does ConstructionBond Provide?

We provide a wide range of surety bonds, allowing you to access everything you need from one place. The primary types are:

 


To read the frequently asked questions regarding surety bonds: click here