LLC Contractor Licensing in CA & CSLB Contractor Definitions

There was a lot of news for California contractors coming from the latest CSLB meeting. New regulation may extend the definition of who is a ‘contractor’ and those waiting for LLC licensing now have a date certain to apply. We begin with a contractor’s question that ‘qualifies’ as unusual…

Q: I have a client who is the sole Officer of a company that is going out of business due to some problem projects. My client is NOT the Qualifier for the company; however, he has his own Class “B” license. The company may file for bankruptcy (BK) protection but my client wants to be able to start a new company using his own license. Is there any need for him to disassociate as an Officer of the current company?

A: The only reason would relate to his current licensing issues. If his present license ends up with a judgment or any disciplinary action, it could impact your client’s ability to secure a new license (until the problem is resolved). If his new license was already issued, and the present license was suspended, the new license could be threatened with an “associated License suspension”.

The BK would likely resolve this but it adds one more layer to the process. If your client is off the license prior to any judgment, he can likely avoid this “associated” problem. Of course, the CSLB still retains jurisdiction over the contractor and could pursue him regarding the ‘problem’ projects.

Q: I was surfing the Internet and came across your web site and many of your prior columns. It was funny being told when I called your office that you were out all afternoon “attending a Contractors Board meeting”. This was after I had been watching the CSLB meeting streaming live for about 20 minutes.

My call was prompted by the Board’s brief mention of proposed legislation to regulate or license construction managers. This item went by very quickly. What can you tell me about the Board’s reasoning and discussion?

A: This is one of several legislative proposals discussed by the CSLB on December 6th at their bi-monthly meeting. Code Section 7026.1 defines the term “contractor”. An Appellate Court decision in 2009 found that someone acting in the capacity of a construction manager is not required to be licensed as a contractor. Therefore, to address what the Board views as overruling their related 2008 ‘Precedent-setting Decision’ they’re proposing to add Section (f) which would expand the definition of a contractor by adding: “provides a bid for a residential construction project; arranges for and sets up work schedules for subcontractors and maintains oversight of the project”. This would relate to home improvement contracts.

A second legislative proposal will seek to amend 7026.1. According to the Board’s Staff report, “It has become commonplace for contractors – licensed and unlicensed –to attempt to circumvent Contractors License Law and Public Contract Code requirements by asserting they are not subject to licensure as contractors because they are ‘Renters of Operated Equipment’”. An example would be a business that provides tractors, backhoes, or graders with a full crew to operate the equipment.

The proposed language would expand the definition of a contractor to include “vendors of operated equipment that exercise direction and control of work covered by this chapter”.

While on the subject of the CSLB meeting, there is BREAKING NEWS regarding Limited Liability Company (LLC) licensing. The Board has announced that LLC applications should be available on December 27th, four days prior to the statutory deadline. As I expect a rush, anyone interested in more information or assistance with newly created LLC applications should call me now.

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