Basic CA License, SOS, FTB, CSLB

If we had a ‘Way Back’ machine like the old ‘Rocky and Bullwinkle Show,’ we could revisit those days when government kept what it knows about you and your business on file cards. As one contractor has discovered that isn’t the case in our ‘information sharing’ society. Another aspiring contractor takes us back to some ‘basic’ training…

Q: I went to renew my CA contractor’s license but the CSLB rejected the application because the Secretary of State suspended my company. Why should this matter? Is there anything you can do to help me with this problem?

A: The CSLB has a long-standing policy that prevents it from issuing or renewing a corporate contractors license if the company is suspended, forfeited or withdrawn with the Secretary of State (SOS). In your case my initial research shows that your company has some sort of tax issue with the Franchise Tax Board (FTB). Government departments routinely share these developments on the information ‘highway’ letting related enforcement agencies update their files.

Based on past experience, I would guess you either owe the FTB back taxes and/or failed to file one or more tax returns. After you straighten this out with the FTB, they will notify the SOS. In turn, the SOS should lift the suspension thereby allowing the CSLB to renew your license. Being that this is “tax season” (as my father referred to it), it may take you considerable time to resolve this issue over the phone or by mail. Personal contact with the FTB directly or through your representative usually works best and should result in a much faster resolution.

Q: My understanding is that in order to get a contractor’s license I need to pass a test, post a bond, and prove I have liability insurance coverage. Is this correct?

A: Well two-out-of-three isn’t bad. Once your application for an original contractor’s license is accepted, you’ll be scheduled for the law and trade exams. After passing the test, the CSLB will require a $12,500 contractors bond and proof of Worker’s Compensation coverage – IF YOU HIRE EMPLOYEES. While it is a very smart idea to carry General liability insurance, this is not required by the Contractors Board to secure or maintain a license.

Q: With the economy the way it is I will be winding up my corporation next month and canceling the license. I intend operating only as a sole owner from here on out. If the corporate license were to be hit with a judgment in the future, could this impact my individual license? What about if I declared bankruptcy?

A: Yes, this could impact your Sole Owner license. As long as you are listed as an officer of record with the CSLB, they can go after any associated license you’re listed on. This would include an Individual; Partnership or Corporate license whether active, suspended, expired or even CANCELLED. Declaring bankruptcy (BK) in most cases will overturn the judgment; however, there are some exceptions. If you pursue a BK, I would strongly recommend contacting an attorney and/or tax professional that specializes in this field.

Q: At what point would a pool maintenance person be required to have a contractors’ license?

A: There is a “C-61”/”D-35” license category called Pool and Spa Maintenance. This covers the install, repair and replacement of pool motors, pumps, filters, pool lights, solar systems that heat pools, electrical switches, etc. If the maintenance is basically ensuring a clean, clear swimming pool then I do not believe a license would be necessary. This might include maintaining or adjusting the chemical balance of the water, removing dirt and leaves from the spa or pool, adding pool chemicals, etc.

RMO/RME, Generals, Partnerships

Okay, a corporation, a partnership and a duck walk into a bar. The duck isn’t part of the story, but the two contractor’s questions begin a complicated journey to a complex answer. Remember it’s not the destination that teaches us the most it’s the journey…

Q: We have a partnership consisting of two corporations. One corporation is 100% owned by a Service Disabled Veteran with a current California contractor’s license. That company is the majority owner of the Partnership. We intend on applying for an “A” and “B” license.

Do the Qualifiers apply as Responsible Managing Employees (RME) or Responsible Managing Officers (RMO)? The CEO of one corporate partner will qualify for the “A” license. The President of the other corp. will qualify the “B”. Will the CSLB accept an application as a partnership listing both corporations as “individuals?” The application form clearly depicts the partners as individuals. What is proper way to proceed?

A: The CSLB will accept a license application for a partnership of corporations. Both general partners must be registered in good standing with the Secretary of State. You cannot list the entities as “individuals” and it is not acceptable to simply have a Qualifier as part of each corporation. Each qualifier will either need to be designated as a RME or qualifying partner (you CANNOT use the RMO designation on a partnership license).

As you’ve seen, the CSLB Original License Application does not lend itself to applying as you’ve suggested. Having handled many hundreds of General (GP) and Limited (LP) Partnerships, I can tell you that the paperwork requirements can be very complicated. Depending on the make-up of the partnership, you can end up needing to file several addendums with officers (for corporations); managing members for a LLC; or additional pages if one of the entities is also another LP.

I have discussed this fact with the CSLB on several occasions. I am sorry there is no easy answer, and suggested the Board devise a special application just for this type of entity. So far, no go.

Q: I have an “A” License and will be doing some solar installs. Could I use “Solar” in my business name? Say my business was Smith General Engineering could I use the acronym SGE Solar? Do I need to register this as a DBA? I would like to use my surname so I don’t have to register a fictitious business name.

A: In order to use the word “solar” in your business name, the CSLB will very likely require that you hold a “C-46” (solar) classification. I suggest that you apply for a name change, which is the only way of knowing for sure. If the CSLB does not accept your request, they’ll explain in writing why it’s not acceptable. Please be aware, that if you were to change the business name to say “SGE Solar”, you could no longer perform work as “Smith General Engineering”. To operate under both names, you need to apply for a second contractor’s license number. Please contact your local government regarding the requirements for filing a fictitious business name statement or DBA.

Q: You assisted us with getting our CA Contractor’s License. We wanted to apply as a LLC but had to settle for a corporate business structure. It looks like Senate Bill 392 has been passed and will be effective in 2011? Are we interpreting this correctly?

A: The information you have on SB 392 is out of date. This legislation allowing licensing of Limited Liability Companies (LLC) did pass the Senate but has not yet passed the State Assembly. According to the CSLB’s Legislative Liaison, should this pass and be signed by the Governor, it would not take effect until January 2012, at the earliest.

Protests, Multiple Licenses & CSLB Board

When your company holds multiple licenses which one do you use to bid a job? If you choose incorrectly another contractor will likely find reason to protest the award. Come along with me to visit the CSLB and meet the newest Board members…

Q: We are a “C-54” tile contractor in business for 30 years. We just bid a job and lost it to a contractor that holds a “C-27” Landscape and a General Engineering license. We questioned the general contractor inquiring how someone with a “C-27” and an “A” license can do “C-54” work. There reply was …”they have several licenses under other entity names. 1) If the contractor is bidding as a “C-27” and /or “A” General Engineering contractor can he do “C-54” exterior vertical tile work? 2) If he qualifies under one of his other entities wouldn’t he have to submit his bid under that company’s name?

A: Not knowing the exact nature of the contract I can only say that in most instances the answer to your first question is NO. In response to your second question, YES, the license class should be part of the licensed entity involved with the bid and not on a related license. You didn’t mention it, but if this is a public works bid the awarding agency can determine what class, despite CSLB regulation, is required.

I regularly visit the CSLB in Sacramento on behalf of my clients. On occasion while waiting at the public counter, I’ll overhear questions from contractors and the response from Board staff. Most recently a contractor wanted to apply for a 7065.1 Exam Waiver to replace the Responsible Managing Officer (RMO) on an existing license. This code section allows the Registrar to waive the law and trade tests if the applicant can, among other things, show supervisory experience for 5 of the prior 7 years. There are several parts to the Code Section, one of which is no longer recognized by the Board.

His application had been rejected and he was inquiring as to why. Apparently, his certification of experience involved work more than a decade ago and there was a question regarding whether he had in fact been “employed” by the company in question. After some back and forth discussion, the contractor stated that he “had been an officer on another license during the past 5 years and would use that experience to gain the waiver”. The discussion continued with the Board staff reiterating that he must show 5 years full time experience within the past 7. The problem is that 7065.1(a) — which at one time would have allowed the applicant to apply for such a waiver — was made inoperative by the Registrar in September 2003. As I exited the building 45 minutes later, the discussion was still ongoing.

Until recently, there were six vacancies on the fifteen-member Contractors State License Board. This has been reduced to four with the recent announcement of two new CSLB members. Paul Schifino, 48, of Los Angeles, and Mark Thurman, 51, of Newport Beach, have been appointed to the Board. Mr. Schifino has owned and served as president of Junior Steel Company since 2003 and, Anvil Steel Corporation since 1996. Previously, he was a partner for Schifino and Lindon from 1992 to 1996, associate attorney for Strook and Strook and Lavan from 1990 to 1992 and adjunct professor at Georgetown University from 1987 to 1989.

Since 2004, Mr. Thurman has been president of ARB Structures. Previously, he was president of Pepper Construction Company Pacific from 1989 to 2004; firefighter specialist for the Orange County Fire Authority from 1980 to 1988 and project manager for Miles and Kelley Construction Company from 1975 to 1980. He is a member of the Associated General Contractors of California’s Board of Directors, Urban Land Institute, Design-Build Institute of America and International Council of Shopping Centers.

CSLB Reference, General License

We begin with what can only be described as a ‘no–win’ situation for one contractor. We finish with a ‘win-win’ for contractors everywhere…

Q: As we discussed on the phone, the Responsible Managing Employee (RME) we’re going to hire has the “A”, “B” and several “C” licenses. He read some documents online that said if he lets us use his “A” (the one we need) he may not be able to continue using his other licenses. Clarify this point for us, so our Qualifier can still use his “B” & “C” licenses. Isn’t there some way to contract around this?

A: Just to make sure I understand, let me reframe the question. An individual holds a CA contractor’s license. He has an “A”, “B” and one or more “C” classifications. This person would like to become your Qualifier (RME) on the “A” only (since this is the only class you need). He would also like to continue operations under his present license for the “B” and “C” ONLY.

I am sorry to say I see no way to work around this. The Qualifier would need to declare his other licenses ‘inactive’ (or disassociate from all licenses) for which he is currently qualified and this would include ALL classifications.

According to a recent Press release from the CSLB, the new 2010 “California Contractors License Law & Reference Book” is available for purchase. The book provides specialized sections about becoming a licensed contractor; home improvement; business management; construction standards, safety regulations; as well as Board rules and regulations. “It’s a challenge for California’s licensed contractors to keep up with continual changes in state contracting laws,” said CSLB Registrar Steve Sands. “This book is designed as a quick reference tool to help our state’s 310,000 licensees meet that challenge.”

This 750+ page book is valuable to have for both established contractors and those new to the industry. But as my readers know all too well, how these laws are implemented can impact every contractor. It is often what is ‘unwritten’ or ‘between the lines’ that can dictate practice or policy. What limitations are there on using a given business name? Which exam waiver is no longer operable? What limitations are there on “A” “B” and many “C” contractors’? How many licenses can an LLC hold in California?

My book “What Every Contractor Should Know: Answers to Real World Licensing Questions For CA, NV and AZ” is a good companion to the 2010 State License Law and Reference Book. The State publication sells for $20.00 plus $6.22 for shipping and handling and is available online, by phone or through the publisher in New York. If purchased together for your reference needs and you contact my office directly, both books are available for $49.00 including tax and shipping. This offer is only available thru Capitol Services as a service for my readers.