Articles of Incorporation & LLC Licensing

I’m getting lots of questions about changing business structures in the ongoing recession and recovery. What do you need to know to get the Secretary of State to ‘inc’ your paperwork as a corporation?..

Q: I sent my Articles of Incorporation to the Secretary of State a few weeks ago. They have not been processed and I am in a great hurry to get this done so I can apply for a new corporate contractor’s license. I understand it is probably going to take several weeks to process. Do you know of any way to speed this up?

A: The Secretary of State has what I would call a four-tier processing system. They will issue a corporate number ‘super fast’ (4 hours); ‘fast’ (24 hours), ‘very slowly’ (4-6 weeks) or ‘unbelievably slow’ (10+ weeks). Unfortunately you fall into the last category.

According to my research, sending Articles of Incorporation to the Secretary of State is currently taking more than 10 weeks to process. Since you are in a big hurry, I would recommend going with the “fast” 24-hour option. This would involve redoing the articles and personally filing them in the Sacramento Office or hiring a service company to do this on your behalf here in the Capitol. The total cost will run $450.00 due to a recently enacted $350.00 “expedite fee”. Assuming there is no problem with the document, you’ll have a corporate number the next day and can then file your Application for a new Original Contractors License. When they finally get to the initial Articles you sent in, these will be rejected and returned with your original $100 fee.

A word of warning though for anyone who has filed articles over the counter (the 4 or 6 week option) and then changed their mind to go with these “super fast” or “fast” options. Forget about it. The Secretary of State will keep the extra expedite fee of $500 (“super fast”) or $350 (“fast”) and will not allow you to swap out the new articles for those filed. This “trick” only works if you filed your articles, amendment or Statement and Designation by Foreign Corporation by mail.

I know this all sounds a bit confusing so please call me and I’ll be happy to further explain the entire process.

Q: I attended a recent meeting where I heard that the Contractors Board would soon be able to issue a license to a Limited Liability Company, or LLC. What can you tell me about this?

A: As readers of this column know, the CSLB can only issue a license to a Sole Proprietor, Corporation, Limited Partnership, General Partnership or Joint Venture. However, as you heard, this may change in the next year or so if a bill pending in the State Legislature is passed and signed by the Governor. SB 392 (Florez) would authorize the Board to begin issuing a contractor’s license to a Limited Liability Company (LLC) no later than January 1, 2012.

California contractors have been unable to avail themselves of the limited liability corporate status since this type of entity was created in 1994. In fact, California is one of about 30 states that require some form of contractor’s license but is the only state that does not allow a license to be issued to a LLC.

The argument that licensing a LLC would be a detriment to consumers and employees helped defeat several prior attempts to pass this type of legislation.

The Florez bill would require applicants for a LLC license to file a $100,000 Surety Bond for damages arising out of specified employee claims and would also require the entity to maintain a policy or policies of insurance against potential damages arising out of a claim.

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