Contractors Corporate License Enhancement

One license can generate many opportunities, if you are a contractor who knows how to extend your ‘reach’. We all learn how to extend the use of a corporate license beyond its usual limits. Readers know that public works bids are always an adventure, because some require license classifications that don’t always fit the work. This contractor won’t become the prime, but he has a chance to profit at the ‘sub’ level . . .

Q: I’ve enjoyed your columns dealing with Contractor’s License questions. Maybe you’ve addressed this but I have been unable to ‘reach’ a conclusion based on your ‘keyword’ search option online (cutredtape.com).

I own 100% of my ‘S’ corporation but would like to do business under a few different names. Since you can only have one ‘dba’ (doing business as) per license, what would be the best way to go about this?

For example, can I apply for another “C-36” license number as a sole proprietor and become a Responsible Managing Officer (RMO) for my existing business; in essence, have the business hold 2 licenses? Or should I set up another corporation and apply for a new license? This would require additional expenses, which I would rather avoid. My main goal is to advertise and operate under several business names (not necessarily entities). Thank you for your time.

A: Thank you for your kind words. Your best option is to apply for another corporate license using a different ‘dba’. In this way, you can legally do business under one corporation using two company names — each with a separate license number. Since there is no limit to the number of fictitious business names (dba) you can hold under one corporation, you could apply for a third or fourth license and therefore simultaneously “advertise and operate under several business names”.

Using the above scenario, you would NOT need to apply for a sole owner license or incur the expense of forming a new corporation.

Note the CSLB has what I refer to as the “rule of three”. This law states that an individual may only qualify up to three corporate or partnership licenses (plus a sole owner license) in a 12-month period. However, two or more licenses under a single corporate entity, only counts as one (of those three).

Q: There is a public works project that requires an “A” General Engineering license; yet approximately half the project involves demolishing an existing building. I have a “C-21” (Demolition) and wonder why my license would not be acceptable? I may file a protest unless they let me bid.

A: I spoke with someone familiar with this project and while it’s closely split between “A” and “C-21” work, the primary goal (plus a slim majority) of the project falls under the General Engineering, or “A” classification. In other words, if you were awarded the project as a “C-21” contractor, there would be no issue with the demo work. However, once the building is leveled, you would not have the proper license for the remainder of the job and could not argue that the work is “incidental and supplemental” as defined under Code Section 7059. On the other hand, since the only reason to demolish the building is to make room for the government’s infrastructure needs, the “A” would be the best overall classification. Rather than fighting city hall, I suggest, contacting several of the prime contractors since I assume most will list a “C-21” sub.

I leave you with one last point that may give you some insight into the agencies thinking. B&P Section 7059(b) also states, “in public works contracts…the awarding authority shall determine the license classification necessary to bid and perform the project. In no case shall the awarding authority award a prime contract to a specialty contractor whose classification constitutes less than a majority of the project”.

Qualifying California Contractors Corporate Licensing

Contractor’s law is one of the most complex systems of rules and regulations in government. Qualifying a contractor’s license for someone else is one of the most difficult parts of that law to understand, so it’s no surprise I get lots of calls from people who have run into trouble. Getting and keeping a ‘qualifier’ is often where problems begin . . .

Q: We have lost our Responsible Managing Officer (RMO) due to some questionable acts on his part. We are now in a lawsuit because of this. Our attorney has stated that a RMO must have an individual license in addition to his corporate one. I think this is wrong but can’t seem to find it in the B&P code. Is this true and if not where is it in the B&P Code?

Also we have someone who is licensed, but is a Responsible Managing Employee (RME) for another company. He wishes to join us as RMO, but wants to remain where he is until we have enough income to support him. Is this possible?

A: There is a common misconception that a RMO must also hold a sole owner license. There is no such requirement; and there is nothing in the regulations that I’m aware of that specifically addresses this. I suggest that your attorney refer to B&P Section 7068 and 7068.1 which describe the qualifications and duties of a RME or RMO and addresses your second question: i.e. someone working as a RME may not become your RMO and still remain active on his current license.

Q: I had a general builder contractor’s license issued with my father as the RME. The license has long expired (and my father passed away 10 years ago). Is there any way that I get licensed again quickly because of previously being licensed? Can this license be renewed?

A: First, a license that has been expired for more than 5 years is no longer valid and cannot be renewed. Second, even if this had occurred within the last 5 years, your father’s signature would be required to renew the license. Other than requesting that your prior license number be reissued (since it was yours as a sole owner), you’ll need to reapply, show the requisite 4 or more years building trades experience (within the past 10) and pass both parts of the license exam.

Q: My husband & I own a contracting company that we bought 4 years ago. It is a corporation & my husband is listed as the only officer. It is qualified by a RME. I have been working & supervising this company from the beginning and we now are looking to replace the current RME. However, being married, our accountant recommended that only my husband receive a paycheck.

My question is: “can I qualify as the RME of the company with no pay stubs to prove I have been working here?” What would I need to do to prove my employment?

A: When applying for a new contractor’s license or to replace the qualifying individual on an existing license, you need to show four or more years experience. The CSLB requires – under penalty of perjury — that someone certify your experience qualifications. Most applications are taken at face value; however, a small percentage is pulled for further investigation. While all applications are looked at carefully to determine if the applicant has the experience they claim, the Board would want to see further proof of your employment in the form of pay stubs, a W-2 or 1099, tax returns, etc. If you cannot produce this documentation, your application will very likely be rejected.

Licensing, RME Responsibilities

While you are always ‘responsible’ as a qualifying individual you may not always be ‘liable’. We also explore more of the ‘in and out’s’ of being a license qualifier as an ‘on the job’ RME or RMO in California. First a ‘general’ answer for another contractor . . .

Q: I am currently working under my brother-in-law’s General contracting license doing concrete and masonry. I would like to form a corporation that does both these trades. As a General I believe he can only have 30% or so of his business come from one trade. That becomes a problem when my concrete part of the business needs to expand. Let me know if you have any ideas please.

A: General building contractors are not limited to a specific percentage of work in one trade. By law, they should work on projects involving “two or more unrelated trades’ but could conceivably handle concrete and masonry much of time while still doing plumbing, electrical, painting, etc. This being said, it is advisable to have the specialty class (in this case “C-8” or “C-29”) if doing a project with only one trade.

If you intend on handling this work separate from the primary business, it makes sense to form a new company. You can only apply for one classification at a time since testing would be required. You’ll need to show at least 4 years journeyman level experience in each trade.

Q: When a Responsible Managing Officer (RMO) disassociates with a corporation does he remain liable for the company operations. What about the liabilities incurred after his disassociation because he had to sign the indemnity agreement on the original contractor’s bond? According to the CA B&P code 7068.2 he is liable until the CSLB board receives the written notification of disassociation.

A: I suggest directly contacting the surety or insurance company that wrote your bond to find out what their policy is regarding liabilities and their indemnity agreement.

Regarding the broader issue of “remaining liable for the company operations “, Section 7068.2, does not actually use the word “liable”. It states in part that the qualifying person (such as the RMO or RME) “shall be responsible for the licensee’s construction operations until the board receives the written notification of disassociation”. (Note: It is legal for this form to be backdated, if filed with the State within 90 days.)

I think the wording in this code section was chosen carefully when you compare the definition of RESPONSIBLE as “accountable to somebody for an action or for the successful carrying out of a duty” and LIABLE as “having legal responsibility for something, especially costs or damage”.

I regularly tell callers – particularly the qualifying individual — who ask if they are “liable” that CSLB codes and regulations speak of duties and responsibilities rather than liabilities.

Q: Is there an expectation by the CSLB that the Responsible Managing Employee or RME be on job site on a daily, weekly, monthly or on an ‘as needed’ basis?

A: As an RME you should be actively engaged with the company as a bona fide employee and must be working at least 32 hours per week (or 80% of the time the company is operating) to comply with Board rule 823. The CSLB does not however, specify how often you must be on site. Since many companies have multiple projects, it would be nearly impossible to be at all of them daily or even weekly. I have even heard top Board staff publicly state there is no rule requiring a RME to be on one specific job site every day or week. Regardless, whether you intend on visiting a job site daily, weekly, monthly or on an “as needed basis” I would caution you to make sure all State codes and regulations are being followed.