Out of State Licensing & Incorporation

With year’s end just ahead come questions about incorporation, contractor’s licensing, taxes and bidding across the border. We’ll ‘stock’ up on answers as I review some important aspects of corporate contractor’s licensing…

Q: Is there a minimum or maximum amount of ownership that the Corporation must give to a Responsible Managing Employee? I ask this question because somewhere I read that if a contractor sets up a corporation he must own 51% in stock. I am confused.

A: If the RME accepts your invitation, there is no minimum ownership requirement (this is also the case for a RMO). Even if the RME owned some of the company, the CSLB would not recognize this. When reviewing a filed license application CSLB staff consider RME ownership as zero.

Who owns stock in a corporation is determined by the officer(s) and director(s). The “51%” figure is only an issue if a sole owner contractor decides to form a corporation and transfer his or her individual license number to the new company.

Q. I saw two active CSLB license numbers listing what appears to be the same Corporation name. Is this legal? Can a CA Corporation be assigned more than one Contractor’s License number at the same time? Does the CSLB tie the State Corporate number to the License?

A: It is perfectly legal for a corporation to have more than one license number. In fact I am aware of some companies that have four or more licenses for the same corporation. These are tied to the same corporate number and can be structured in several ways.

If a corporation wanted to be separately licensed in several different classifications, they could have a different license number for each entity. In this way the company could sign contracts under different names yet be part of the same corporation. For instance they may want to identify their plumbing operations separately from their HVAC business. It is my understanding that the CSLB will not allow a company to simultaneously have two license numbers for the same corporation with the SAME classification.

A second reason a corporation might want to have more than one license number is to retain the business names of companies they purchase. For example, an existing company purchases three businesses. They retain their existing license and apply for three new licenses each with a ‘Doing Business As’, or ‘DBA’ designation. The end result is four license numbers for four separate entities under one corporation (and one corporate number).

Finally, if a company wanted to divide themselves into divisions so each would have a separate license number, they could apply for multiple licenses in order to bid under these different names. In this case rather than a ‘DBA’, their business name would, for example, read: XYZ Construction, a division of USA Building Company, Inc.

Q: I’ve emailed you a few times and need a quick response. I now have one more question… We are looking into bidding a job in Oregon…What would need to be done to do that legally?

A: Oregon has contractors licensing requirements however I only have limited familiarity with licensing in this state. I suggest that you contact the Construction Contractors Board in Salem, OR the phone number is (503) 378-4621, or visit them on the web (you can find a link on my web site, www.cutredtape.com).

During the past several months, some larger companies have approached Capitol Services to determine what other States require for contractors. Some states license virtually every trade; while others only license a few. A number of States do not even require licensing at all. Some states like Oregon have an extensive application process and require each applicant to pass an exam.

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