Corporate Filings for Contractors

As backward as it may seem if a public entity says they want a plumber to install their electrical wiring they can do that. Granted, this may be an extreme example. However, what may be ‘proper’ isn’t always the most ‘acceptable’ alternative when bidding a public project as our first question illustrates. Another contractor learns what’s in a ‘second’ name…

Q: I am a California contractor holding “A” & “B” licenses. I recently walked a public pre-bid for an electrical generator replacement project. The city engineer is insisting that only a “C-10” subcontractor be allowed to bid the project as a prime contractor. However, looking at the scope of work, it involves more than just electrical. Concrete, block work, drywall, painting, roofing and many other trades are included. Is there any code I should reference in my letter to the city engineer asking them to allow us to bid the job with our general licenses? We will be listing the appropriate subcontractors in our bid.

A: Thank you for your email. It’s tough to say if the “A” and/or “B” would (or should) be proper without knowing more about the project. This being said, in most cases, a general engineering contractor can handle any project in connection with a fixed work involving specialized engineering knowledge and skill. This would include powerhouses, power plants and other utility projects. In other words, if the electrical generator replacement is part of a power generation facility, the “A” (as well as the “C-10”) should be acceptable (B&P Section 7056).

The general building or “B” classification could also be acceptable if the electrical project is in connection with a structure “for the support, shelter, and enclosure of persons, animals, chattels or moveable property of any kind” (Section 7057). If in fact the job includes numerous trades (such as drywall, painting, roofing, electrical etc.) then a “B” could self-perform some of the work and list licensed subcontractors for the remaining trades as you have proposed. As I have said many times in this column, the “proper” classification(s) for public works is dependent on the project scope whereas the “acceptable” class determination is up to the awarding authority. On occasion these may not match.

Even if an “A” or “B” fits this project, the city can still determine they want to limit bidding to a “C-10” and unfortunately, the CSLB is not in a position to overrule these decisions.

Good luck in your discussion with the City Engineer. If this does not resolve the issue you can always appeal to the City Council.

Q: I have a corporation with a dba and want to start a second company. I filed an application with the CSLB to Change Business Name but they sent it back (along with my check for $11.00) saying this was not the proper form. What application should I have used?

A: The Application to Change Business Name would have been correct if you wanted to change the operating name of your existing business. However, as we discussed, since you’re interested in simultaneously doing business under a second name, you’ll need to file an Application For Original Contractor’s License (7065 Waiver).

The Contractors Board will only allow one business name per license number. If you want to conduct business under two different dba’s, a second license number is required, therefore the need for an original application. No further testing will be necessary.

Home Improvement Contractors

When something old is rebuilt or remodeled, specific rules may apply to contractors making those home improvements in California. What’s the ‘fallout’ from this rule in new construction? Another contractor is ‘dead’ certain he sent his renewal in on time, but it didn’t save his license from ‘expiring’. When should you send in a renewal to avoid having a problem?…

Q:  I was wondering if you knew whether the home improvement contract disclosures required to be provided by contractors applied to original construction of single-family homes?  In other words, if an institutional owner (such as a bank, for example), hires a contractor to construct multiple single-family homes, do you know if this is a “home improvement contract” for purposes of B&P Code Section 7151 and 7151.2?  The language seems to only relate to repair or remodeling rather than original construction.  What is your take on it?

A:  It is my understanding that construction of new homes does not fall under the Home Improvement Contract (HIC) disclosure requirements in Section 7151.2.  You are correct, the language relates to repair and remodeling rather than original new construction.

“Home Improvement” is defined in Section 7151 as “the repairing, remodeling, altering, converting, modernizing, or adding to residential property”. This Section goes on to say that home improvements include but are not limited to “the construction, erection, replacement, or improvement of driveways, swimming pools…patios, awnings, storm windows, landscaping, fences…” etc.  Although, new residential homes and commercial properties are not included in this definition, as I was re-reading this Code Section, I noticed that it was originally added in 1961. This may explain why one of the other listed home improvements is “fallout shelters”.

Q:  I just received a letter from the C.S.L.B. advising me that my license had expired on January 31st, 2009.  I sent in my inactive renewal (postmarked January 31st), along with the $150.00 check which cleared my bank.  I checked on line and my license is listed as expired, not inactive..  What should my next step be?  Any idea what may have happened?  Any suggestions would be appreciated.

A: My guess is that when the Board received your renewal (after the expiration date) it was likely marked delinquent which would trigger an additional late fee of $75.00.   Renewals postmarked by the due date (like yours) are supposed to be considered as timely; however, since the Board receives hundreds of renewals a day (more at the end of each month) a few may not be coded correctly.  It’s likely the CSLB sent you a letter in February regarding this matter? If not, you’ll need to call the Board (1-800-321-CSLB) and see what information they have in their computer system regarding this license. Have the cancelled check handy for reference.

I often caution readers of this column to send in their renewal early.  The Board typically mails out renewal applications at least 75 days ahead of the expiration date.  For “active” renewals, this means answering a few questions, signing the application; and mailing it to Board headquarters in the provided self-addressed envelope. To avoid any problems make sure the proper personnel sign (including all qualifying individuals) and include the $300.00 renewal fee (for active licenses).

Even with submitting a “timely” renewal, if you wait until the last minute, your license will show up as “expired” for a few weeks until the Board processes your application.  If there is a problem (such as an incorrect or missing signature or a corporate suspension with the Secretary of State), and the renewal is rejected, this means even more delays.  All it takes is one potential customer to look elsewhere or one homeowner to refuse payment to see how a late renewal can impact your business.

RME RMO for California Contractors

Everyone can read the contractor rules and regulations, but understanding what is written, especially when much depends on someone else’s interpretation, is not so easy as our contractor questions illustrate…

Q: I recently found your articles on the Internet and they have helped me out tremendously. I’m in the process of forming a new business and require a qualifier in order to obtain my license. This individual currently holds three licenses and I would like to have all three placed in the name of the business. I have come to understand that because there are multiple licenses, he will not be able to serve as the Responsible Managing Employee (RME) but would need to serve as the Responsible Managing Officer (RMO).

I understand that he will need to serve as the company’s designated person for all matters related to those licenses (please feel free to correct me if I am misstating something). Having said that, am I required to give him equity or ownership in the corporation? I am definitely confused by what the guidebook states and would like to know for certain. Unfortunately, I’ve contacted the CSLB several times and either can’t get through or receive varying responses. Can you help me?

A: Thank you for your kind words. I am glad the ‘keyword’ search for my past columns helped you and truly sorry you have had so many difficulties reaching the Contractors Board.

We need to first define what you mean by “currently holding three licenses”. If you mean, he is the qualifier (RMO) on three contractor licenses then he will not be able to qualify your new business. The CSLB has a “rule of three” which limits the number of licenses one person can qualify in a year. On the other hand, if you’re referring to three license classifications (such as the “B”, “C-10” and “C-36”), then there is no problem placing them all under your new company. There is no limit to the number of classifications someone can qualify.

You’re correct; this RMO will need to serve as the company’s designated (i.e. responsible) person for all matters related to your activities. If this individual wants to qualify his current license as well as your license, he must own 20% or more of each entity. If he will serve as your RME, he must be employed full-time (at least 32 hours per week) but will need to inactivate his current license.

Q: I hold a “B” license which is now Inactive (but not expired). For the past several years I have been working for a construction company but have been approached by another company to become their RMO. The current RMO was allowing the company to use his license but he officially disassociated several weeks ago. I want this position. Should I activate my license first? If I leave in a few years, do I get my sole owner license back? Any guidance would be very much appreciated.

A: When someone with a sole owner license becomes the qualifier (RMO) on a new license he or she does not assign their existing license over to the new company. As we discussed, this corporation was issued a distinct license separate from the sole owner’s license number. Therefore, if you disassociate in a few years, your sole owner license will be right where you left it. Whether you decide to become a RMO or RME, there is no need to reactivate your existing license.

Get to Know Your CSLB Members:

The Governor appointed Lisa Miller-Strunk to CSLB in in November 2007. Since 1991, she has served as president of Shellmaker Incorporated based in Costa Mesa. Ms. Miller-Strunk is an “A” and “B” contractor and is a long time member of the Associated General Contractors (AGC). Her CSLB term continues through June 1, 2010.