‘Work-arounds’, loopholes, or gray areas can sometimes be exceptions to the rules. But they are often looked for to avoid doing what is ‘business as usual’ as in our first question. Nice try but let me count the ways it’s not going to work. We finish with raising a contractor’s ‘suspended’ corporation…
Q: We are a service company with a “B” (General Building) license. We contract with homeowners but we don’t actually perform the work; we sub-contract it out to licensed specialty contractors. We are planning to form a separate company that would act in a similar capacity and we are wondering if this new company will need a license. The new company will not actually sign contracts, but we would act as a construction manager, producing the plans, designing, and coordinating the project, and then set the homeowner up with our various subcontractors and they would contract with the homeowner directly. Our new company would in turn receive a percentage. Are we required to be licensed?
A: There are a couple things improper with the scenario you described. First of all, yes, you would be required to be licensed. B&P Code Section 7026.1 defines “Contractors” to include consultants who provide or oversee a bid for a construction project, arrange and set up work schedules for contractors, and maintain oversight of the construction project. Since the new company would be maintaining oversight of the projects, you will be required to obtain a license. Of course, an exception would be if the home improvement project is under $500.
Secondly, in our opinion, receiving a percentage of the contract essentially sounds like a referral fee or an inducement, which is prohibited by Section 7157 of the B&P Code.
Q: We have a situation where we were given a subcontractor from the owner of the project, who has apparently used this sub on several projects for installing interior fencing. In the case of the project we are under contract for, this subcontractor is under contract with us. The odd part is they don’t have a California contractor’s license. They told me since they don’t get inspection on the fencing, they don’t have to have the contractor’s license, only a business license. Do you know if that is correct? I thought if you did actual work on a construction project in CA you needed a contractor’s license.
A: Assuming the work is over $500, you are correct. A “C-13” (Fencing) license is required to install fences.
Q: I haven’t worked in California for the last few years but I have a customer requesting that I do some work for them in the LA area so I need to renew my license. When I look it up online it says that in order to renew I will need (among other things) to get my corporation in good standing with the Secretary of State. What do I need to do and can you help?
A: Yes, when I inquired with the Secretary of State, I found that your corporation is suspended because of a Franchise Tax Board (FTB) issue. Typically this has to do with failure to file and/or pay taxes in a timely manner.
We can help! We would first find out what returns/monies are needed and get the required information submitted to the FTB. Once all returns are filed and payment has been made (if required), you will need to complete a Revivor form, also submitted to the FTB. The FTB will then notify the Secretary of State, which should put your corporation back in good standing.