Contractor License Questions: Removing license qualifiers and restrictions on licensing limited liability companies

Can you dump your license qualifier after 5 years in California? That’s just one of the current rumors that can confuse the already complex rules governing contractors. Another one involves the Legislature “limiting” the CSLB from licensing a popular business structure. What you know may be a “fact,” it’s what you “think” you know that can cause problems for contractors as these questions illustrate. . .

Q. I am a contractor with a sole owner “B” license. A friend of mine, who is not a licensed contractor, wants to partner with me and proposed to convert the sole proprietorship to a limited liability company. Since I am not privy to the CSLB rules and policies, I have a few questions that I need answered if you have the time.

  • Does he need to be a licensed contractor to partner with me?
  • Will the CSLB allow the issuance of a new license number with this LLC?
  • If I own 51 percent, can I assign my license to the new company?
  • Will the partner be considered an RMO or RME?

Any help and information related to this matter is greatly appreciated. I read your column every time I receive the California Builder and Engineer magazine.

A. All of your questions are good ones. First, there has been no change in CSLB policy regarding licensing of a limited liability company (LLC). They will not issue a license to this type of entity. Second, on a partnership license only one person needs to be the qualifier. There is no need for your partner to first secure his own license. For this partnership, your title would be “qualifying partner”. By definition, a Responsible Managing Employee (RME) could not be a partner and a RMO can only be associated with a corporation license.

The CSLB will allow a sole owner to reassign his license number — but only to a corporation and only if he or she owns 51% or more of the new entity. Licenses cannot be reassigned either to or from a partnership. If you have further questions regarding the application process, please contact my office.

Q. I have a license that is qualified by a Responsible Managing Employee (RME). Another contractor told me that once my license is over 5 years old, I do not need any qualifier and can drop the RME. Is this a fact?

A. NO, this is one of those rumors whereby a little information can be dangerous. I believe the contractor you spoke with was referring to the regulation that allows some license holders the opportunity to “replace” the RME after 5 years with a waiver of the law and trade exams. For a contractor’s license to remain in good standing, there must be a “qualifying individual” listed on the license. In many instances where the RME has left the license, the company has 90 days to replace him with a new qualifier. Failure to replace the qualifier within the CSLB time frame would result in the license being suspended.

Knowledge is power and knowing where to go for the answers is half the battle.

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