What is a License Bond?
There is a wide array of different types of bonds … in fact, there really are so many different types of bonds, as well as differences between these types of bonds, that it is impossible to really have an in depth understanding of all bond varieties without spending a good deal of time studying them. One type of bond that many people are likely to have at least some contact with is the license bond. Indeed, you may have heard of or been confronted with the need to obtain a license bond.
A license bond is a bond that is rather aptly described by its moniker. (With other types of bonds, it is not particularly easy to discern the purpose of the bond from its name: surety bond, fidelity bond, and so forth). In simplistic terms, a license bond is a bond that must be obtained in advance of obtaining a certain type of license.
In this day and age, there are more and more license requirements that include the posting of a license bond in advance of actually being issued a license. For example, in some states, prior to being able to obtain certain types of gun permits, it is necessary to obtain an appropriate license bond. More commonly, if you are interested in entering into certain types of business enterprises, you must first obtain a license bond.
When it comes to a license bond associated with a business enterprise, a common type of operation that requires both a license and license bond is a business that will be involved in the sale of alcohol. Liquor stores, bars and restaurants are required to obtain special liquor licenses in order to sell these types of libations. During the process of applying for a liquor license, a liquor store, bar or restaurant will be obliged to obtain a liquor license bond as well. (There are, of course, other business enterprises that do require a license bond. However, these are common examples and are appropriate for illustrative purposes.)
When it comes to the license bond associated with certain types of business enterprises, the real purpose behind the license bond is to ensure that the enterprise does not end up defaulting on certain tax and fee obligations. In many instances, this type of license bond is designed to cover the payment of certain taxes, fees and related obligations should the bonded entity fail to properly pay such obligations in an appropriate manner.
