LLC, Limited & General Partnerships & “C-4″, “C-36″ Licenses

Some contractor licensing ‘arrangements’ are subject to change, others not so much. Learn more about how ‘limited’ some partnerships aren’t. We start with another contractor’s concern about RME’s with a ‘sole’. We also add more ‘fuel’ to the firestorm of controversy about how public agencies can structure their bids…

Q: I was hoping to get an opinion on the following scenario. A contracting company is formed as Sole Ownership, however the company has a Responsible Managing Employee (RME) who is the qualifying individual, not the listed owner. Would it be fair to say that this company is at least 51% owned AND controlled by the listed owner?

A: Yes, by definition, a sole proprietorship is 100% owned and controlled by the listed owner, even with a RME. The CSLB, as matter of policy, will not recognize a Responsible Managing EMPLOYEE as owning any of the company.

Q: If someone is applying for a Limited Partnership (LP) license and they are listing a corporation as the General Partner (GP) and a Limited Liability Company (LLC) as the LP on the application, can they add more General Partners later (after the license is issued)? If so, are they required to inform the CSLB? The original GP and LP won’t change; they will just add additional GP’s.

A: Yes, they are required to notify the CSLB. The reason is that by adding a General Partner after the license is issued, this changes the partnership entity thereby requiring the company to apply for a NEW license (and new license number). The CSLB will however, allow an LP to change Limited Partners. Also, for my reader’s information, beginning January 1st the CSLB should begin allowing a LLC to act as a General Partner (something they are now prohibited from doing).

Q: We protested a bid on the basis that our competitor did not list a “C-36” (Plumbing) subcontractor to run a new gas line to some furnaces that are being replaced. Their contention is that their “C-4” (Boiler Hot Water Heating & Steam Fitting) license allows them to install the new line as incidental to the installation of the furnaces and they can therefore self-perform this work. I contend that they are allowed to make the connections to gas service, but aren’t allowed to install completely new gas lines. The school is agreeing with them and has responded to our protest accordingly. What does someone in the know think?

A: My opinion is that the school district was within their rights to take the action they did. Of course, I am not familiar with all the details of this bid, but on its face, a “C-4” can perform the work you describe.

In part, “a boiler, hot-water heating and steam fitting contractor installs, services and repairs power boiler installations, hot-water heating systems and steam fitting, including … steam fitting and piping, … fuel oil tanks, fuel oil lines … and all other equipment … associated with these systems”.

Therefore, it could be argued that since the primary project was installation of a furnace, this related piping would be “incidental and supplemental” to the job.

Second, a public agency can determine which classification is proper as allowed by Code Section 7059(b): “In public works contracts… the awarding authority shall determine the license classification necessary to bid and perform the project (this is the same section that references “incidental and supplemental” language). This being said, I have seen where public agencies, like a school district, get it wrong and therefore should be challenged – just not in this case.

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