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DO I NEED A SURETY BOND FOR MY BUSINESS?

Updated: Oct 6

Businesses That Use Surety Bonds

Surety bonds are crucial for a wide range of businesses, ensuring compliance with regulations, protecting against financial loss, and guaranteeing the fulfillment of contractual obligations. Below, we outline the main types of businesses that use surety bonds and provide examples for each.



1. Construction Companies

Construction companies frequently use surety bonds to guarantee the completion of projects and payment to subcontractors and suppliers.

  • Example: A general contractor working on a public infrastructure project must provide performance and payment bonds to the government agency overseeing the project.

2. Auto Dealerships

Auto dealerships are often required to obtain surety bonds to operate legally and protect consumers.

  • Example: A new car dealership must secure a motor vehicle dealer bond to ensure compliance with state regulations and protect customers from fraudulent practices.

3. Freight Brokers

Freight brokers use surety bonds to guarantee payment to motor carriers and shippers.

  • Example: A freight brokerage firm must obtain a freight broker bond to comply with federal regulations and ensure carriers are paid for their services.

4. Cleaning Services

Cleaning service companies use surety bonds to protect clients from potential losses due to employee theft or damage.

  • Example: A residential cleaning company provides a business service bond to reassure clients that they are protected against theft by employees.

5. Travel Agencies

Travel agencies use surety bonds to protect clients’ funds and ensure the delivery of promised services.

  • Example: A travel agency must obtain a travel agency bond to guarantee that customers will receive the travel services they paid for or be reimbursed if the agency fails to deliver.

6. Contractors and Subcontractors

Contractors and subcontractors in various industries use surety bonds to guarantee the fulfillment of their contractual obligations.

  • Example: An electrical subcontractor working on a commercial building project provides a performance bond to ensure the electrical work is completed according to the contract.

7. Mortgage Brokers

Mortgage brokers use surety bonds to ensure compliance with state regulations and protect clients from fraudulent activities.

  • Example: A mortgage brokerage firm must secure a mortgage broker bond to operate legally and protect clients from financial loss due to fraud or misrepresentation.

8. Notary Publics

Notary publics use surety bonds to protect clients from financial harm resulting from errors or misconduct.

  • Example: A notary public must obtain a notary bond to ensure that clients are compensated for any losses caused by the notary’s mistakes or fraudulent actions.

9. Health Clubs

Health clubs use surety bonds to protect members’ prepaid dues and ensure the club operates according to state regulations.

  • Example: A new gym must secure a health club bond to guarantee that members will be reimbursed if the gym closes unexpectedly.

10. Auctioneers

Auctioneers use surety bonds to protect clients and ensure the proper handling of auction proceeds.

  • Example: An auctioneer must obtain an auctioneer bond to guarantee that sellers receive the proceeds from the sale of their items.


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