Bonds For Your Business
They are not insurance, but they are commonly issued by insurance companies. A bond is a financial guaranty by an independent party of an obligation that one party has to another.
Situations where bonds may be needed:
- ERISA requires that a bond be issued on behalf of employee benefit plans subject to ERISA regulations. Bonds must be equal to 10% of the assets of the fund or a maximum of $500,000.
- Contractors may be required to provide bid and/or performance bonds for jobs. Such will provide funds to fulfill the obligation in the event that the contractor defaults or cannot complete the project.
- Financial guaranty bonds may be required by turnpike authorities or utility companies or similar entities to guarantee payment for services.
- Licenses permits may be required by government entities in order to place property such as signs on government owned property.
Types of Bonds:
- Fiduciary Bond
Guarantees the handling of other persons' funds. This type of bond is most commonly needed for probate court, when a fiduciary takes control of a person's property, manages it, pays debts, distributes proceeds according to law and makes the appropriate accountings.Types of fiduciary bonds include:
- Administrator or Executor
- Surety Bond
A Surety Bond is an agreement under which one party, the surety, guarantees to another party, the obligee, the performance of an obligation by a third party, the principal.Types of surety bonds include:
- Bid Bond-Provides financial assurance that your bid has been submitted in good faith and that you will enter into the contract at the price bid and will provide the required performance and payment bonds.
- Performance Bond-Protects the obligee (usually the owner or GC) from financial loss should you fail to perform the contract in accordance with the terms and conditions of the contract documents.
- Payment Bond-Guarantees that you will pay certain subcontractors, as well as all of your bills for labor and materials associated with the project.
- Maintenance Bond-Normally guarantees against defective workmanship or materials. However, maintenance sometimes incorporate an obligation guaranteeing "efficient or successful operation" or other obligations of like intent and purpose.
- License and Permit Bond-Primarily protects the general public and governmental bodies by reinforcing the laws, ordinances and regulations designed to protect public health and safety. It may also be used to guarantee the payment of taxes due to state or local governments