What is a bond for when you start a new business?
I have started a new business and it said I need a bond why?
- Anonymous1 decade agoFavorite Answer
Simply put a bond (sometimes referred to as a surety bond) is a third party obligation promising to pay if a vendor does not fulfill its valid obligations under a contract. There are various types of bonds such as LICENSE, PERFORMANCE, BID, INDEMNITY & PAYMENT. A bond is a financial guarantee that you will honor a business contract. Frequently a customer will require that your company be bonded.
A PERFORMANCE bond is a guarantee that you will perform work in accordance with the terms of a contract.
A BID bond is a guarantee you will perform work if the bid is won by you.
A INDEMNITY bond promises to reimburse loss incurred if you fail to perform or if you fail to pay other vendors in the performance of the contact.
A LICENSE bond is required by some states for certain businesses. In some cases you pay the state directly rather than obtaining a bond.
A PAYMENT bond promises you will pay all subcontractors and material providers utilized in the performance of a contract.
A bond is NOT an insurance policy. This is important to remember. A bond provides assurance that the contracted work will be satisfactorily completed only. For example your bond will not pay for property damage or personal injury resulting from your work. For this you need conventional insurance coverage.
Your local yellow pages will list companies that provide bonding services under "surety bonds." Also, check with Bond-By-Fax, Commercial Surety Department at 1 (800) 395 CBIC. Generally speaking, bonding companies will only provide bond coverage in an amount that you can cover with existing liquid assets.
Before you purchase a bond from any bonding company, have the bond documentation reviewed by your attorney and ensure that you understand exactly what the bond can and cannot protect against - for you and your customer.Source(s): For more small business information, go to - http://www.isquare.com/faq.cfm#bond
- Patches6Lv 51 decade ago
A bond is like an insurance policy for a specific reason. Sample: Newspaper carriers from larger circulation papers signed a bond that when they quit delivering the papers for the company, the bond would make sure all moneys were accounted for in the sense if there was a "short" the bond made it up...
I do not know what type of businesses need bonds but it could be because of the financial backing is short supply or otherwise needs the assurance...
- gombosLv 44 years ago
In essence, surety bonds assurance that paintings might be played in line with a agreement or to all relevant legislation and rules. If a trade fails to meet its obligation or authorized responsibility, then the injured social gathering can dossier a declare in opposition to the bond and acquire a few kind of reimbursement. In a cleansing trade, being bonded offers your purchasers the arrogance that when you abuse the buyer or in some way damage a purchaser, that man or woman can fail a bond declare and count on to acquire right reimbursement. The surety corporation that issued the bond is there to be certain the obstacle is made proper. Consumers gravitate in the direction of promises, and printing the word “wholly certified and bonded” on what you are promoting card offers folks gigantic peace of brain that their pursuits might be blanketed.