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Unlicensed contractors are risking their livelihood. Civil and criminal penalties, including jail time, may be ordered against the unlicensed contractor. Without a
valid license, the contractor has no course of action against a delinquent consumer who has not paid and may have to return any monies paid for the unlicensed work.
Some states, such as California, have enacted especially severe penalties against unlicensed contractors who do repairing following a natural disaster or state of
emergency, including fines up to $10,000 and imprisonment up to three years1.
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Business licensing laws change frequently and can lead to unintentional unlicensed activities. An established business entity may suddenly be required to obtain a
new or different type of license. A state or local government may deem even widespread business practices illegal. Businesses conducting unlicensed activities may
be fined, cited, or even closed.
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Renewing a business license is just as important as obtaining one in the first place. Renewal periods are based on each specific license, generally ranging from every
one to three years. The date of renewal is either a fixed annual date or based on the date of issuance of the original license. Many state departments do not send out
reminder notices about upcoming expiration of a license. A license holder must be diligent about properly renewing the license, or they will face serious penalties.
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State regulatory agencies take great steps to identify and penalize unlicensed business operations. Unlicensed businesses diminish the integrity of the profession,
create undue competition for properly licensed businesses, and often provide inadequate goods and services. State agencies utilize many different methods of
investigation to zero in on unlicensed businesses, including: task forces, sting operations, and encouraging public complaints.
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Businesses that collect debts from consumers without a license face severe penalties that could diminish their professional reputation and hurt their bottom line. As collection agencies grow they may not be
aware that their activities within a state require licensure, but ignorance is no excuse when charged with the unlicensed and unlawful practice of collecting debts. Unlicensed collection agencies may be
penalized by the state and sued by the debtors they target.
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