No, it just means that you pay a insurance company a $100 (or whatever the amount is) and the insurance company puts up a bond payable to the California State Contractor's Licensing Board and if you screw anyone over like take money and don't do the work then head to Argentina to do Honda...
The limited specialty like i have the test is only about contracting law. The license like Frans is a landscaping license and you have to take test on the law and a test on your trade. I have a friend who is doing it right now and the State has hired on some more people in the licensing bureau...
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