Contractor’s Limited Liability

There are no words that can encompass the human tragedy of the Southern California fires. Thousands of homes destroyed, lives lost and people impacted for the rest of their lives by the awesome power of fire and nature. We must all think of how we can help give our neighbors and fellow citizens of California our support in these days and months ahead. Unfortunately, while most of us will be focused on how to help, others will seek to profit at the expense of these victims.

As with any natural disaster, the fires throughout Southern California bring out the best and worst in people. The best are those public employees including police and firefighters and the many unnamed heroes and volunteers who instinctively help those in need. The worst: people who are drawn to these burned out and damaged areas for the sole purpose of making peoples lives even more miserable. These are unlicensed and unscrupulous contractors who rush to disaster scenes like moths to a flame.

In the Northridge Quake, Oakland Hills Fire Disaster, and recent fires in Lake Tahoe, agents of the Contractor’s License Board cited hundreds of illegal contractors. They were offering services, ranging from simple demolition to complete home rebuilding. When an unlicensed contractor is caught by the CSLB, or other law enforcement, they could go directly to jail. It is a felony to contract without a license in a declared disaster area and consumers can protect themselves by checking a contractor’s license status and history first thing.

Too often, in a tragedy of this kind – where there’s lots of destruction — people often look for somebody to remedy the damage so they can get back into their home as quickly as possible. When people get desperate to get something done, that increases the chances they’ll fall prey to an unlicensed contractor.

The Contractors State License Board (CSLB) has a standard warning for consumers about the dangers of hiring unlicensed contractors following a disaster, whether it is earthquake, fire, flood or mudslide. “Don’t let a natural disaster result in a man-made one by hiring the first contractor who comes along,” as noted on the CSLB website by Registrar Steve Sands. “Take your time and protect yourself against con artists who will take your money and run — Hire only licensed contractors and check them out with the Board.”

Q: Can a limited partnership get a contractor’s license in California? Based on our reading of the law, it should be able to get one. But, in real life will the CSLB issue a license to a limited partnership? (This is a classic limited partnership and not a limited liability partnership).

A: YES, a Limited partnership (LP) is an acceptable form of licensure; a limited liability partnership (LLP) is not.

Q: My corporation has ceased doing business. In fact, we have not done any business under this corporation for almost three years. Why would the FTB be requesting a tax return?

A: Even if your corporation has ceased doing business, you must formally dissolve or withdraw with the Office of the Secretary of State (SOS) to terminate its legal existence. In order to dissolve, the corporation must File tax returns for all delinquent tax years; pay all outstanding tax liabilities, penalties, interest, etc. and complete one or more forms required by the FTB and SOS.

There are about 100 reasons on why you should make sure the licensed entity you’re working under is the same as your license number. This is reason ‘#52′.

A recent Appellate Court case ruled against a sole owner who was trying to collect on a Payment Bond. Problem was that he was doing business as “a signed the contract as a” a corporation. If you have recently (or even not so recently) incorporated but are still conducing business as a sole owner, it’s time to straighten out your license.

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