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A surety bond is a legal contract made among three parties: the obligee, the principal, and the surety. This bond is a commitment that one party (the principal) makes to pay a second party (the obligee) a certain amount of money if the principal fails to comply with a particular obligation like fulfilling a contract. Thus it acts as a protection for an obligee and will hopefully protect the obligee from running losses if the principal fails to meet a part or all of the obligations. The surety acts as the person who assures the obligee that it is the responsibility of the principal to fulfill his or her duties. This article provides answers to some of the most commonly asked questions about issues related to this. Can I get a Credit Services Organization Surety Bond in California and place it directly with the state without taking the help of a surety bond company?
Usually, there is no bar for you to become self-bonded. You have to deposit your own funds as per the norms of the state of California. You may contact the state and find out if they allow you to place a bond with them. Or you may ask them if you can use an Escrow account which is authorized to hold it. I own an LLC business in Indiana and recently came to know that I need to have a surety bond which I can’t afford. If I retain the business and get sued by customers, the attorney general or the state, will the LLC cover me?
In case you need to have a bond, you can’t carry on a legal business without posting it. Since it is illegal to continue the business willingly without a bond, you don’t have the immunity from personal liability through LLC liability protection. In case the bond is beyond your means, the state of Indiana gives you another option. You may obtain a letter of credit under IC 24-5-15-8, which should allow the Attorney General to waive the requirement. I recently bought a Medical Marijuana Dispensary and the California Board of Equalization sent me a notice of security requirements to deposit $25,000 as security. They said that it could be cash, deposit account or surety bond. What is a surety bond?
The state probably sent you the notice since it was experiencing trouble collecting taxes from previous owners. Now they want to ensure that the taxes are paid on time. They are probably also under the impression that in a dispensary a lot of cash transactions take place and taxes are not paid on it. You can deposit cash with them. Otherwise you might get a surety bond. This is a type of insurance policy in which you pay a premium. In this manner if you don’t pay the taxes which are due, the state collects the money from the insurance company based on the bond. A bond usually costs 10% of the amount bonded and a $25,000 bond would cost $2,500 per year. Surety bonds are of various kinds. It might be confusing for someone who is not familiar with the varieties and the intricacies of such bonds. It is advisable to take the help of a business lawyer while dealing with these issues.
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