CA License Transfer to LLC, Corporate Licenses & Gift Card Kickbacks

The waiting is over after more than a decade of demand contractors can form a new ‘structure’ for licensing their business. For many years in CA the State refused to allow Limited Liability Companies (LLC) to be licensed as contractors. With this pent-up demand now released the rush is on at Capitol Services…

 

 

Q:  Now that a LLC can be licensed, we would like to transfer our corporation number to the new LLC.  Can this be done?

 

I have received many questions during the past few weeks related to the new LLC license.  I am familiar with several corporations that were formed for the express purpose of doing business in CA until such a time as the state allowed LLC construction companies to become licensed.  The new law amended Section 7075.1 to allow the transfer of a corporate license “to a limited liability company that is formed by a corporation to continue the business of the corporation subsequent to the cancellation of the corporate entity’s license, provided the personnel listed for each entity are the same.”

 

A potential for problems with this transfer is the corporation will cease to exist and this may call into question ongoing contracts.

 

Q:  We are looking into the dissolution of our present corporation, and would like to know if we can transfer our contractor’s license to the new corporation.

 

A: According to B&P Code Section 7075.1, if forming a new corporation you’re only allowed to transfer the current license number to the new entity under the following conditions: “…when the parent corporation has merged or created a subsidiary, the subsidiary has merged into the parent corporation, or the corporation has changed its filing status with the Secretary of State from a domestic corporation to a foreign corporation or from a foreign corporation to a domestic corporation.”  For any of these scenarios the formation of the new entity must be to continue the business of the formerly licensed corporation.

 

 

 

Q:  We’re considering offering a gift card to any homeowner who signs up for new flooring during the month of February (amount to be determined).  Do you think this would be acceptable under CSLB rules?

 

A:  According to B&P Code 7157(b), A contractor or his or her agent or salesperson may give tangible items to prospective customers for advertising or sales promotion purposes if the gift is not conditioned upon obtaining a home improvement contract and does not exceed five dollars ($5).

 

Unless the offer involves a very minimal gift card, you may instead want to offer a rebate or reduction in contract price because it is not considered “tangible”.

 

This is based on an Attorney General opinion from 1985.  In response to a question from an Assembly member, the AG concluded, “as an inducement to contract, a home improvement contractor may offer a homeowner cash rebates or discounts on the purchase of products or services”.  This “non-tangible” rebate could include carpeting, painting, cabinetry, or any of several other ‘home improvement’ trades.

 

 

Construction News: According to the Associated General Contractors of California (AGC), Governor Jerry Brown’s recently released budget contained welcome news for transportation as it proposed a significant structural change to transportation agencies and continuation of Proposition 1B projects.  For years the AGC has contended that spending on infrastructure has been inadequate to allow for growth and business in CA.  However, according to the AGC’s chief Executive Officer Tom Holsman, “It appears the governor is moving in the right direction in putting California on a path to recovery.”

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