General California Contractors Licenses

Human wisdom partially comes from experiences that are shared by a friend or relative. This collective learning is often expressed by our most common clichés like ‘haste makes waste.’ That’s one every contractor can appreciate when paying for materials. Another to keep close to mind is ‘the devil is in the details’ especially when thinking about the ‘general’ rules for contractors. Reading the ‘fine print’ doesn’t always mean you can understand it…

Q: I would like to start a General Construction company bidding on public works projects. I’m not sure I can pass the “B” License exam at this time or that I have the required four years experience. I’m planning on hiring a friend who is a General Contractor to qualify my corporation and begin bidding on construction projects. However, before doing that, I wanted clarification on the Responsible Managing Officer (RMO) ownership rule.

How does owning 20% of the company correlate into revenue for the RMO? Does owning 20% of the company mean 20% of stock or my company’s revenue/profits? If he’s my RMO do I have to pay him anything?

His benefit in this arrangement is the fact that I would be utilizing his company for labor, materials, and management. Finally, is there a typical way of setting up payment to an RMO or is that negotiable?

A: If this general contractor wants to retain an active license as well as serve as your qualifier, he will need to certify under penalty of perjury that he owns 20% or more of the voting stock/equity of your corporation. This does not mean he needs to receive 20% of your company’s revenue/profits

He will be your qualifying individual and will be an officer of your company. Therefore, as the Responsible party for all construction work, he should be: employed by your company, involved in the day-to-day operations, and receive payment. The fact that his existing company will benefit is fine, but it does not justify being your RMO in name only. I am not aware of any standard way of establishing an amount of payment, so yes this would be negotiated between you and the qualifier.

Q: I am aware that a General “B” License holder is allowed to do all types of construction work, however if a certain amount of any one type of work is done, then a “C”-classification is legally required. At what percent of any one type of work is this required? Are they legally allowed to do and advertise their work in a particular sub-category (i.e.: plumbing, sealing, electrical…) without a “C”-class? Also, does this apply to the “A” Engineering Contractor License holder?

A: “B” general license holders can take a contract or subcontract if it involves two or more unrelated trades (other than carpentry) or they can perform jobs involving framing/carpentry only. They would need to have a specialty classification if the project is only that one trade (plumbing, electrical, painting, etc.). The General can also take a contract for only one trade if the work is subcontracted to a properly licensed specialty contractor. There is no rule or regulation that I am aware of whereby a percentage of one type of work triggers the need for a specialty license.

As for a “B” advertising specialty work, section 7027.1 states it is a misdemeanor to advertise for work unless the person holds a valid license in “the classification so advertised, except that a licensed building or engineering contractor may advertise as a general contractor”. In other words, I do not believe a “B” can specifically advertise for plumbing or electrical projects unless they hold the proper “C” class.

Regarding your question on the “A”, there is nothing in the Board’s statutes that specify a given number of trades (like the “B”).

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