License and Permit Surety Bonds

Every state licenses funeral directors and other funeral industry professionals. In most cases, a funeral director’s license bond is required. The bond is the funeral professional’s guarantee to do business in a completely lawful and ethical manner, including with regard to handling funds deposited by consumers to pay for pre-need funeral plans.

An auto dealer bond protects consumers against financial loss stemming from the dealer’s actions, such as misrepresentation or other shady sales practices. In many states, there are separate licenses for new and used auto dealers. In some states, dealerships offering new cars are required to be licensed only if they sell used vehicles in addition to the new vehicles. Used car dealers are typically required to be licensed and bonded, if not at the state level, then in the counties or municipalities in which they are located.

A notary serves as an impartial witness to the signing of important documents. A notary public bond is the notary’s guarantee to carry out those tasks with complete integrity. Many states require notaries to be licensed, and obtaining the appropriate license and permit bond is part of that process.

Contractor license bonds are required at the state and/or local level, depending on the laws of the particular state. Like all license and permit bonds, they serve as the licensed contractor’s guarantee to abide by all laws and regulations governing the construction industry in a specific jurisdiction.

In many states, obtaining a liquor license requires the purchase of an alcohol bond that guarantees compliance with applicable alcohol laws and regulations, particularly regarding the prohibition of alcohol sales to minors and the payment of sales taxes to the state and/or local licensing authority.

Tobacco bonds are a type of license bond required of business owners engaged in the tobacco industry. It functions much like an alcohol bond in enforcing sales tax remittance and the prohibition of tobacco sales to underage individuals.

Freight brokers and forwarders are required to purchase a $75,000 BMC bond in order to obtain an operating license from the Federal Motor Carrier Safety Administration (FMCSA), an agency of the U.S. Department of Transportation. The bond provides funds to pay claims filed by shippers or carriers who are owed money by the principal.

Mortgage brokers are licensed at the state level and typically must purchase a surety bond as part of the licensing process. The mortgage industry is highly regulated, and mortgage brokers are held to high standards of professional conduct. A mortgage broker license bond is the principal’s guarantee to live up to those standards.

Like mortgage brokers, insurance brokers work in a highly regulated industry that requires them to operate lawfully and ethically. Insurance brokers are licensed at the state level, which typically involves purchasing a license and permit bond as a pledge to operate in accordance with all applicable laws, regulations, and industry standards.

Collection agency owners are typically required to purchase a collection agency license bond when seeking licensure at the state level. The bond is a guarantee to do business in accordance with applicable laws, including the Fair Debt Collection Practices Act.

Also known as Insurance Adjuster bonds, this type of bond is required as part of the state licensing of public adjusters. The bond is the principal’s guarantee to comply with applicable laws and the state insurance department’s rules and regulations.

In some states, pharmaceutical wholesalers must purchase this type of license and permit bond to prevent mismanagement of drug shipments and sales to pharmacies. A pharmacy bond is the principal’s pledge to abide by the rules and regulations governing the pharmacy industry at both the federal and state level.

Nursing homes and other care facilities are required by state licensing authorities to purchase a patient trust bond (also referred to as a nursing home bond, Medicaid bond, or Medicare bond). The purpose of the bond is to ensure that the facility properly manages patient funds and can account for all transactions.

The Centers for Medicare and Medicaid Services (CMS) require companies selling durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) to purchase a DMEPOS bond before they will be allowed to bill Medicare or Medicaid. The purpose is to prevent fraudulent billing by health care providers and ensure that health care providers deal only with legitimate DMEPOS suppliers.

Typically, auctioneers and auction houses are licensed at the state level through a process that requires the purchase of an auctioneer surety bond. The bond protects consumers against financial loss due to the principal’s fraudulent or unethical sales practices, such as misrepresentation of items being auctioned or substitution of goods.

Non-vessel-operating common carriers (NVOCCs) provide ocean transportation to the public and generate bills of lading and other documentation, but do not operate any vessels. They are required by the Federal Maritime Commission (FMC) to purchase an NVOCC bond, which is a type of license and permit surety bond generically known as an Ocean Transportation Intermediary (OTI) bond, in order to obtain a  license.

Many different types of businesses fall under the umbrella term of “money transmitter”—online merchants that accept credit cards, companies that handle wire transfers of funds, payment processors, and so on. State licensing requirements are strict, and have become more so in this age of digital commerce, cryptocurrency, and online money transfers. Nearly all states require the bonding of money transmitters as a condition for licensure.

Not all states license travel agents, but those that do often require the purchase of a license and permit bond. The purpose of the bond is to ensure that the travel agent forwards the funds deposited by travelers in advance of a trip to the appropriate parties (e.g., airlines, hotels, rental agencies, etc.). It protects both consumers and travel companies against financial loss.

The term “credit services organization” (CSO) refers to credit repair firms and credit counselors who offer services to help consumers improve their credit scores. Throughout the U.S., CSOs are licensed and regulated at the state level and are required to purchase a CSO license bond for the financial protection of consumers.

Many states require health clubs (gyms, spas, fitness studios, martial arts studios, etc.) to obtain a health club bond as a mandatory step in the licensing process. A health club bond is the principal’s guarantee to refund membership fees paid in advance in the event of the facility’s closure and to otherwise operate lawfully and ethically.