A Surety Bond is a contract in which one party (the surety) guarantees the performance of certain obligations by a second party (the principal) to a third party (the obligee.) For example, construction contractors are often required to provide a surety bond to guarantee they will complete a project in accordance with all of the specifications of a construction contract.
The Carmoon Group specializes in serving the needs of small and medium sized businesses. We can help your business obtain many different types of surety bonds, including those listed below.
Contract bonds ensure that a contractor will adhere to the specifications of a construction contract. It guarantees the project owner that work will be performed in a timely manner according to the agreed upon requirements and that all subcontractors, suppliers and workers will be paid.
The Carmoon Group can assist your business in obtaining several different types of contract bonds, including:
- Bid Bonds: Bid bonds guarantee the project owner that a construction contractor will enter into a contract if awarded a job on which it has bid. It also guarantees that the contractor will obtain any additional bonds required by the contract.
- Performance Bonds: Performance bonds guarantee the project owner that the contractor will perform the job in accordance with all of the conditions of the contract.
- Maintenance bonds: Maintenance bonds guarantee against losses associated with faulty workmanship or materials.
- Payment bonds: Payment bonds guarantee payment for labor and materials used to complete a construction project.
A surety bond is a form of credit: That is, the surety company is using its own funds to guarantee that your business will complete a project as agreed. For this reason, most surety companies require extensive documentation before issuing a surety bond. This typically includes (but is not limited to):
- Three years of financial statements (Some, but not all surety companies require that these be prepared by a CPA)
- Personal financial statements from all owners of the business
- A current bank reference letter
- A detailed explanation of the construction project that the bond will guarantee
The surety may also ask for additional financial records, personal and business references and a business continuation plan that details how the business will be run if the owner dies or becomes ill.
Commercial Surety Bonds
Commercial surety bonds guarantee some aspect of your profession or occupation, and are usually required by law. For example, a licensed general contractor may be required to have a commercial license bond to guarantee that he complies with local building codes.
Commercial bonds are a feature of many different occupations and industries. Some types of commercial bonds offered by The Carmoon Group are listed below.
- License and Permit Bonds: In many jurisdictions, a license or permit bond is required for those practicing in certain occupations to operate a business. These bonds may be mandated by federal, state or local laws. Some examples of license bonds include contractor license bonds, plumber bonds, electrician bonds, HVAC commercial bonds and non-resident license bonds.
- Agricultural Dealer, or AG Bonds: These bonds are required for businesses that are licensed by the U.S. Department of Agriculture to buy and sell agricultural products such as grain, hay, livestock, produce and milk.
- ARC Bonds: Also known as travel agent bonds, these bonds are required by the Airline Reporting Corporation. They guarantee that travel agencies who collect airfare from customers make payment to the appropriate airlines.
- Auto Dealer Bonds: Also known as Motor Vehicle Dealer or MVD bonds, these bonds guarantee that motor vehicle dealers comply with the law, specifically in regard to financial transactions. Similar bonds are required for boat dealers, motorcycle dealers, mobile home dealers and snowmobile dealers.
- Fuel Tax Bonds: These commercial bonds are required to guarantee payment of taxes by any business that sells fuel.
- Liquor Bonds: Liquor bonds guarantee compliance with state and federal laws regarding the manufacturing, sale and storage of alcoholic beverages.
- Lottery Bonds: A lottery bond is required for any business that houses a lottery machine. It guarantees compliance with established standards for operating the machine.
- Mortgage Broker Bonds: These bonds ensure that mortgage brokers comply with state laws as well as the mortgage broker license code.
- Notary Public Bonds: These bonds ensure that Notaries Public comply with state laws.
- Public Official Bonds: Public official bonds protect taxpayers by ensuring that public officials perform their sworn duties faithfully and in accordance with state and local laws.
- Title bonds: Also known as a Defective Title Bond, Certificate of Title Bond and Lost Title Bond, this bond is required to register a vehicle for which the original title is no longer available or defective in some way.
- Utility bonds: These bonds guarantee the payment of utilities.
- Warehouse bonds: Warehouse bonds guarantee that goods stored in a warehouse will be delivered to the owner upon presentation of a receipt.
Court Surety Bonds are sometimes required during court proceedings to protect parties against financial loss. Also known as Judicial Bonds, they offer protection in various circumstances involving the judicial system. Here are some examples of the kinds of Court Bonds you might need:
- Cost Bonds: A Cost Bond guarantees payment of court costs associated with an appeal of a decision by a lower court.
- Indemnity to Sheriff Bonds: This bond protects sheriffs from lawsuits arising from the seizure of personal or commercial property.
- Plaintiff Bonds: Plaintiff bonds guarantee payment of court-awarded damages if a case is decided in favor of a defendant. There are several types of plaintiff bonds, including:
- Attachment Bonds are required before the court can seize an individual’s property to secure a judgement. The bond guarantees the payment of any damages incurred by the defendant if the court decides against the plaintiff in the case.
- Replevin Bonds ensure that seized property is maintained in its original condition and not sold or disposed of in any way.
Probate or Fiduciary bonds are a type of court bond that is sometimes required during the settlement of an estate. Some types of probate bonds include:
- Administrator Bonds, ensure the appropriate administration of an estate when a person dies without a will
- Conservator bonds guarantee responsible handling of the assets of a minor or other person who has been deemed incompetent to handle his or her own finances by the court.
- Executor Bonds protect against any fraudulent activity by the executor of the will.
- Guardianship Bonds ensure that an appointed guardian faithfully cares for and protects the welfare, assets and financial holdings of a minor or otherwise incapacitated person.
Fidelity bonds protect your business assets against losses associated with employee theft. Many businesses whose employees handle money or valuable assets such as jewelry choose to be protected by a Fidelity Bond.
There are three types of Fidelity Bonds: Business Service Bonds, Standard Employee Dishonesty Bonds and ERISA Bonds.
Business Services Bonds
A Business Services bond protects your customers by guaranteeing losses resulting from dishonest acts by employees while on their premises. So, if one of your employees steals a laptop, money, or other personal belongings from a customer, the customer will be reimbursed. Business services bonds are a good choice for house cleaning businesses, janitorial services, dog walkers and pet sitters. Not only do they protect the customer, they also add to your credibility and enhance your reputation in the community.
Standard Employee Dishonesty Bonds
A Standard Employee dishonesty bond protects your business against dishonest or fraudulent acts by your employees, including theft of money or other property. The Carmoon Group often recommends this type of bond for professional service providers such as doctors, dentists and CPAs.
ERISA bonds are required by the Employee Retirement Security Act of 1974. They protect pension participants and beneficiaries from a fiduciary’s fraudulent or dishonest acts by requiring a bond equal to at least 10 percent of the plan’s assets.
To learn more about the bonding process and find out what type of bonds your company might need, contact the Carmoon Group at 516-292-3780 or request a consultation online. An agent will get back to you within one business day.