Adding Specialty Classes, Partnerships & Corporate Licensing

Could you bid more work if you qualify for a new specialty based on your experience in another class? Can a corporation ‘give’ its license to another company? Must a partnership register with the Secretary of State? A wide range of questions and answers in this edition of the “Capitol Connection.” Don’t forget you can always find more on these and other contractor’s questions by keyword search at www.cutredtape.com…

Q: A question has come up about what would be involved in ‘transferring’ our existing license (“ABC”) to our new company (“XYZ). How easy would it be to do this? What would be the timeframe for completion?

A: Since ABC is a corporate license it would be very difficult to transfer the number to XYZ. The only way this could happen is if the ABC Corporation were merged into XYZ. Otherwise, XYZ will need to apply for its own license.

If you want to retain the ABC license you will need to locate a new Qualifier, either a Responsible Managing Employee (RME) or Responsible Managing Officer (RMO). If ABC will cease operations, the Qualifier can transfer their status to the new license. As of this writing, it should take you less than a month to secure a new contractor’s license number.

Q: I have held a sole owner license with the “C-35” Lath and Plaster for over 12 years. Will the state board consider a waiver of the “C-9”? To me, Lath Plaster and Drywall are pretty closely related. Thank you.

A: Code Section 7065.3 allows contractors like you to apply for an additional class and request a waiver of the trade exam. As I have mentioned in prior columns, this code section has been around since 1990 and allows both general and specialty contractors to apply for one or more additional classifications if the new class is closely related to the present class held by the contractor.

Applying for an exam waiver requires a good deal of paperwork (such as project lists) and there is no assurance the Board will grant your request. This being said, during my 20 years handling or reviewing these “7065.3” applications, I have seen the Board grant a number of additional classifications with no testing. I have accumulated an unofficial list of those classes that are “closely related” so anyone considering this type of application can contact my office for an expert opinion and anticipated chance of success.

Q: I’ve formed a General Partnership and applied for a contractor’s license. I received a reject letter from the CSLB telling me I need a Federal Employer Identification Number. How do I go about getting this? Do I need to register with the Secretary of State like a corporation?

A: A Federal Employer Identification Number (FEIN) can be applied for by phone or online through the IRS. 
Once issued, you should provide this nine-digit number to the CSLB. In turn, they should accept your application for processing. It may only take a few minutes to complete the online form, and my understanding is that the FEIN will be issued soon thereafter. General Partnerships are not required to register with the Secretary of State; however, they do have this option.

Out of State Licensing & Incorporation

With year’s end just ahead come questions about incorporation, contractor’s licensing, taxes and bidding across the border. We’ll ‘stock’ up on answers as I review some important aspects of corporate contractor’s licensing…

Q: Is there a minimum or maximum amount of ownership that the Corporation must give to a Responsible Managing Employee? I ask this question because somewhere I read that if a contractor sets up a corporation he must own 51% in stock. I am confused.

A: If the RME accepts your invitation, there is no minimum ownership requirement (this is also the case for a RMO). Even if the RME owned some of the company, the CSLB would not recognize this. When reviewing a filed license application CSLB staff consider RME ownership as zero.

Who owns stock in a corporation is determined by the officer(s) and director(s). The “51%” figure is only an issue if a sole owner contractor decides to form a corporation and transfer his or her individual license number to the new company.

Q. I saw two active CSLB license numbers listing what appears to be the same Corporation name. Is this legal? Can a CA Corporation be assigned more than one Contractor’s License number at the same time? Does the CSLB tie the State Corporate number to the License?

A: It is perfectly legal for a corporation to have more than one license number. In fact I am aware of some companies that have four or more licenses for the same corporation. These are tied to the same corporate number and can be structured in several ways.

If a corporation wanted to be separately licensed in several different classifications, they could have a different license number for each entity. In this way the company could sign contracts under different names yet be part of the same corporation. For instance they may want to identify their plumbing operations separately from their HVAC business. It is my understanding that the CSLB will not allow a company to simultaneously have two license numbers for the same corporation with the SAME classification.

A second reason a corporation might want to have more than one license number is to retain the business names of companies they purchase. For example, an existing company purchases three businesses. They retain their existing license and apply for three new licenses each with a ‘Doing Business As’, or ‘DBA’ designation. The end result is four license numbers for four separate entities under one corporation (and one corporate number).

Finally, if a company wanted to divide themselves into divisions so each would have a separate license number, they could apply for multiple licenses in order to bid under these different names. In this case rather than a ‘DBA’, their business name would, for example, read: XYZ Construction, a division of USA Building Company, Inc.

Q: I’ve emailed you a few times and need a quick response. I now have one more question… We are looking into bidding a job in Oregon…What would need to be done to do that legally?

A: Oregon has contractors licensing requirements however I only have limited familiarity with licensing in this state. I suggest that you contact the Construction Contractors Board in Salem, OR the phone number is (503) 378-4621, or visit them on the web (you can find a link on my web site, www.cutredtape.com).

During the past several months, some larger companies have approached Capitol Services to determine what other States require for contractors. Some states license virtually every trade; while others only license a few. A number of States do not even require licensing at all. Some states like Oregon have an extensive application process and require each applicant to pass an exam.