General & LLC Licensing

One question often leads to another. That’s the first sign you may need to ask an expert as our opening indicates. As the economy has slowed many contractors find they have more questions than bid opportunities. Serious questions need to be asked when someone wants you, as a licensed contractor, to be ‘responsible’ for their work…

Q: I am a California General Contractor running a small construction company. Our business took a hit with the economy, but I’ve managed to keep working.

A mold remediation company who needs to work with a contractor in order to get insured has approached me. I’m not sure in what capacity, but I’m assuming as a Responsible Managing Officer (RMO) or Responsible Managing Employee (RME). This may be a great opportunity for me, but I can’t help being a little concerned. My questions are as follows . . .

Is it ever advisable to become an RMO/RME for a company whose officers you don’t personally know? Is this commonly done, or should I be skeptical about being approached? Is there any way I can protect my license and limit liability? Would I be better protected to demand the 20%+ ownership and become their RMO?

A: I cannot say whether you should become an RMO/RME for a company whose officers you don’t personally know. This is something you’ll need to decide after weighing the potential risks and rewards. I would however highly recommend, that should you decide to qualify this new license, first consult with an attorney to assess legal issues and minimize your exposure.

As a RME or RMO, you will be responsible for the work performed. Another factor is what experience do you have with mold remediation? If the answer is little or none, I would be cautious about using your license in this type of work. While there is no specific contractor’s license covering mold remediation, safety or financial issues could arise that impact you and the company.

Choosing to become either RME or RMO is another issue I would discuss with legal council as this could relate to protecting your license and limiting liability.

Q: I read on your ‘Q&A’ page where a person asked if they could work on the weekends with their license. My situation is that I know a gentleman who is starting up a solar installation company and wants me to be the RME using my license number. I want to still operate my electrical sub contracting business at the same time. Since he is just starting and only has one install over the next two months, I would not want to give up my business just to work on one job with him. Am I allowed to do this?

A: Whether it’s one job or a hundred, CSLB policy does not allow you to operate one contracting business while simultaneously being a RME for a second company.

Q: I am a licensed General Contractor and a sole proprietor. I want to abandon the sole proprietorship and start a Limited Liability Company. I have searched the CSLB website and have not found the proper forms to do so. Can you help?

A: Not yet. The reason you cannot locate the proper form is that one does not exist. The CSLB cannot grant a license to a LLC. There is however pending legislation which if passed and signed by the governor, would allow licensing of a LLC beginning in January 2011. Unlike the other 4 attempts to get this through the Legislature, it appears the fifth time may be the charm? Look for more detail on this legislation in a future column.