MHIC Licensing 2 — Questions and Answers
Question 1: Under Maryland Home Improvement Law, which of the following is a prerequisite for obtaining an initial MHIC license?
- Passing the MHIC examination (Correct answer)
- Completing 5 years of licensed contractor experience
- Holding a college degree in construction management
- Submitting letters of recommendation from past clients
Correct answer: Passing the MHIC examination
Passing the MHIC examination is a required step to obtain an initial Maryland home improvement contractor license.
Applicants for the MHIC license must pass a written examination that covers Maryland Home Improvement Law, business practices, contract requirements, and trade knowledge. The exam is administered by MHIC-approved testing providers. In addition to passing the exam, applicants must meet financial responsibility requirements, pay licensing fees, and have no disqualifying criminal history.
Question 2: An MHIC licensee wishes to add a partner to their business. Under MHIC regulations, what must happen?
- The new partner must be listed on the MHIC license and meet all license requirements (Correct answer)
- No action is required as the existing license covers all partners
- The partnership must obtain a separate license from each county they work in
- The new partner only needs to register with the IRS
Correct answer: The new partner must be listed on the MHIC license and meet all license requirements
When ownership or management of an MHIC-licensed business changes, including adding a new partner, MHIC must be notified and the new partner must meet all applicable license requirements.
The MHIC license is tied to both the business entity and its responsible individuals. Adding a partner changes the ownership structure and may require updating the MHIC license to reflect the new ownership. The new partner may need to pass the MHIC exam and meet all other licensing requirements. Failure to report changes in ownership or management is a license violation.
Question 3: Which of the following is TRUE about the MHIC license in Maryland?
- A separate MHIC license is required for each business entity a contractor operates (Correct answer)
- One MHIC license covers all businesses owned by the same individual
- MHIC licenses are transferable between business entities
- Corporate officers do not need individual MHIC licenses
Correct answer: A separate MHIC license is required for each business entity a contractor operates
Each distinct business entity (sole proprietorship, LLC, corporation) that performs home improvement work in Maryland must hold its own MHIC license.
Maryland Home Improvement Law requires each business entity performing home improvement work to be individually licensed. A contractor who operates multiple businesses or forms a new business entity must obtain a separate MHIC license for each one. Licenses are not transferable between entities or individuals. This ensures that each business operating in the market has demonstrated compliance with all licensing requirements.
Question 4: A Maryland home improvement contractor has their license suspended. During the suspension period, what are they permitted to do?
- Only complete work on contracts signed before the suspension (Correct answer)
- Continue all normal business operations
- Subcontract all work through a licensed contractor
- Advertise for future work to be completed after the suspension ends
Correct answer: Only complete work on contracts signed before the suspension
During a license suspension, a contractor may only complete work already under contract as of the suspension date. They cannot solicit or enter into new home improvement contracts.
When the MHIC Commission suspends a license, the contractor is prohibited from entering into new home improvement contracts or advertising for new work. However, they may generally continue to perform work under contracts entered into before the suspension took effect, subject to any specific terms of the suspension order. This protects homeowners who already have contracts from being left with unfinished projects.
Question 5: Which of the following financial requirements must an MHIC license applicant meet?
- Demonstrate financial solvency and not be in bankruptcy (Correct answer)
- Maintain a minimum bank balance of $100,000
- Provide a surety bond of at least $1 million
- Submit 3 years of certified profit and loss statements
Correct answer: Demonstrate financial solvency and not be in bankruptcy
MHIC applicants must demonstrate financial responsibility and solvency. Being in active bankruptcy proceedings is disqualifying.
The financial responsibility requirement for MHIC licensure means applicants must not be in active bankruptcy and must demonstrate an ability to properly manage the financial obligations of a contracting business. While there is no specific minimum bank balance required, the MHIC evaluates overall financial fitness. This helps ensure that licensed contractors have the financial capacity to complete projects and fulfill their contractual obligations to homeowners.
Question 6: Under Maryland law, a subcontractor working for a licensed MHIC contractor on a residential project is:
- Required to hold their own MHIC license (Correct answer)
- Covered by the prime contractor's MHIC license and needs no separate license
- Only required to have a local business license
- Exempt from all MHIC requirements
Correct answer: Required to hold their own MHIC license
Subcontractors performing home improvement work in Maryland must hold their own MHIC license. They are not covered by the prime contractor's license.
Maryland Home Improvement Law requires that all parties performing home improvement work — including subcontractors — hold valid MHIC licenses. A subcontractor who works without a license exposes both themselves and the prime contractor to MHIC disciplinary action. Licensed prime contractors should verify that all subcontractors they hire hold current MHIC licenses before allowing them to work on residential projects.
MHIC Licensing 2
Under Maryland Home Improvement Law, which of the following is a prerequisite for obtaining an initial MHIC license?