California Contractor Licensing for Corporation and Sole Owners

I assist a contractor’s family that ran into a ‘brick’ wall when trying to ‘dig’ up answers to questions they had about licensing. While regular readers know how complex the rules and regulations for contractors can be, looking ‘in’ from outside the world of licensed contractors is even more daunting for one attorney who needs some basic help…

Q: My uncle is a licensed contractor in California and currently holds two classifications (“C-27” and “C-29”). He wants to form two corporations and wants each one with a name that describes the type of work that is being performed for each license. I spent a few weeks trying to find solutions on the CSLB website but I simply end up with headaches and unanswered questions. I even called the Board and after being on hold forty-five minutes, the representative was unable to help. Is there any way my uncle can do this? Thank you for your time.

A: It can sometimes be difficult to navigate the CSLB web site or get through on the phone. Sometimes people are connected with a representative right away while other callers have told me they end up waiting quite a while as you did.

Your uncle can separate his two classifications using one to qualify each new corporation. There is no requirement that a contractor must use both (or all) classes on each license he holds. For example, his “C-27” company could be “Can-You-Dig-It Landscaping” while simultaneously operating the “C-29″ corporation as “Another-Brick-in-The-Wall Masonry”.

Q: A colleague in my law office gave me your name as someone who might be able to answer a simple question regarding contractor licensing. We have a client who has an individual contractor license and who wanted to associate it with a corporation (which he owns 100%). I understand there is a simple form by which a sole proprietor can have their license re-issued to a corporation, which he or she owns, but then that license cannot be re-issued to them at a later point in time.

Is there another way for a contractor to obtain a license for his or her corporation without giving up their individual license (e.g., inactivating their current personal license and somehow qualifying their corporation for a new license)? I apologize if this question is simplistic or perhaps Licensing 101 but would appreciate any input you can provide. Thanks.

A: When dealing with the CSLB, or for that matter any state government agency, there are no simplistic questions.

When an individual applies for a corporate license — and owns at least 51% of the company — the CSLB requires that the applicant complete the form “Licensed Sole Owner Applying For Corporation”. This simply asks the contractor to check the box marked “YES – Reissue my sole owner license number” or “NO – DO NOT reissue my sole ownership license number … Please issue a new license number to the corporation”. You are correct that if the sole owner elects to have his license number reassigned, it will forever be tied to the new corporation. The Board will not re-issue it back to him in the future.

A common misconception within the construction industry is that in order for a sole owner to qualify any new license he or she is in effect moving the license into the new entity. Rather, he is only “moving” his ability to qualify the license. There is nothing in the law requiring that his sole owner license be re-issued to the new entity and as owner of 20% or more of the company stock, there’s no requirement to inactivate his existing license.

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