Contractor License Questions: Licensing foreign corporations, restrictions on Limited Liability Corporations and Partnerships

For more than 25 years I have carried the “ball” for contractors when they must “rush” the bureaucracy. In almost every circumstance, coming to Sacramento to file your paperwork is going to be faster. However, how many contractors can spend the time and money away from the job to do so? A reminder of why one form of business structure won’t work for contractors in California and another contractor learns that time is still money. . .

Q. We are a small AZ contractor seeking help in obtaining a CA contractor’s license. We filed the original application last year (ourselves) but to our chagrin had not registered our company as a Foreign Corp. with the Sec. of State in CA; hence we were rejected. We have a qualifying party, the applicable bonds, and Worker’s Comp coverage but need help getting registered. We would like to expedite this process. Can this be done faster in person rather than mailing something to Sacramento?

A. Thank you for your email. Whether a domestic or foreign corporation, filing documents with the CA Secretary of State is almost always faster if done in person. For instance mailing articles of incorporation to Sacramento typically takes from 4-7 weeks to process. With a personal delivery service, it will likely take about 6-7 workdays. If you must have this registration quickly, the Secretary of State has a 24-hour “expedite” service costing $350.00 (but only if done in person). If you were to personally come to Sacramento it is possible these documents could be filed and processed the same day.

Q. I want to apply for a General Engineering Contractor License for a LLP. What is the process and cost to the State?

A. The Contractors Board will NOT license a Limited Liability Partnership (LLP) or Limited Liability Company (LLC). I would suggest speaking with your tax specialist or attorney to determine what type of business structure is best for your situation. The CSLB will issue a license to a Limited Partnership, General Partnership, Sole Owner or Corporation. The CSLB fee is $400.00 regardless of which type of license you apply for.

Q. I have an existing corporation that was suspended by the Secretary of State in 2002 (due to non payment of taxes). This company has a license but it cannot be renewed until the corporation is in good standing. I have never done any work with this company but now have an opportunity for a job. Would it be faster to fix the current problem and renew the license or simply apply for a new one? If applying for a new corporation license, can the license number be transferred?

A. Timing is everything. Now that the State’s tax amnesty program is over, it will cost you considerably more to reinstate your existing corporation. As we discussed, the State requires a minimum annual tax of $800.00 even if no work is done or the company has a net loss. In your situation, the tax, penalties, interest, etc. will exceed $6000. However, this process can likely be accomplished faster (about 4 weeks) than applying for a new corporate license (estimated at 8 weeks). If timing is more important than money, pay the tax and renew the license. Conversely, if you have a few months, form a new company and apply for a new contractor’s license. The prior license number cannot be transferred.

Knowledge is power and knowing where to go for the answers is half the battle.

Contractor License Questions: Sharing contractor’s licenses and responsible managing employees

Can you be a Responsible Managing Employee in California while living in another state? One contractor needs to know and we all learn from the answer. Another contractor with an individual license is qualifying a corporate license. Can he still do business as a sole proprietor too? Finally, can a contractor share his license with his wife?. . .

Q. I contacted you a few months ago regarding renewing our CSLB license. We now have a new set of officers to put on the license but our RME will shortly be leaving the company, which leaves us with a problem. We do not currently have any staff left in your State.

Are there any consultants in California that act as Responsible Managing Employee (RME) on a professional basis that we can hire? How feasible is it for someone based in our home state to come and take the qualifying exam and act as the RME?

A. Regarding your question…. You may wish to advertise in a professional journal or newspaper that you’re looking for a superintendent that is also licensed in CA. I personally do not know of anyone in that position.

There is no regulation concerning having an RME that is based in another state as long as this person is a “Bona Fide” employee (not a consultant); works at least 32 hours a week for your company and is involved with the day-to-day operations on projects in CA. This does not mean he must be on-site all the time but ideally he should be involved with the work in some supervisory capacity. I will fax you a copy of CSLB rule 823, which addresses this issue.

Because your license has been in existence 6 years, there is a possibility one of your current supervisory employees could qualify to become your new RME with no testing.

Q. I will soon become the qualifying individual on a new corporate license and will own approximately 10% of the company. Can I still keep my personal license active? What bonding will the Contractors Board require?

A. To keep your present license active would require that you own at least 20% of the company stock. On the other hand, owning (at least) 10% means you will NOT be required to post a $7500 Bond of Qualifying Individual. The Board will still require a $10,000 Contractors Bond (or cash deposit) as they do for all active licenses.

Q. My wife has been working in my (sole proprietor) painting & wall covering company for a number of years. She has been responsible for the wallpaper installation and much of the estimating. I would like her to ‘share,’ the license if that’s possible. How would she go about this?

A. You can’t “share” a sole proprietor license. However, you would be able to add your wife to this license if she qualified a different classification. For example, there is a “C-61″/”D-29” classification for “Paperhanging.” Although this is covered by your “C-33,” you could apply for an additional class with her as a RME. An alternative would be to form a partnership or corporation and apply for a new license with both of you listed as partners or officers respectively.

Knowledge is power and knowing where to go for the answers is half the battle.