Original Application, Business Names & LLC Licensing

While some things are ‘one size fits all’ a contractor’s license is ‘tailor made’ as one contractor will discover. It’s very frustrating when work comes to an end; however for some contractors this situation often signals a new ‘beginning’…

Q: I was part of a construction company that dissolved a few years ago. Unbelievably the company I joined at that time has now decided to close its doors. I want to start my own company and would like some advice regarding the name I would use, how best to apply, bonding requirements, fees, etc.

A: As Alexander Graham Bell once said, “Sometimes we stare so long at a door that is closing that we see too late the one that is open.” In your case, you appear ready to venture through that door.

As far as a business name, you should first begin by deciding how you want to conduct business. Most people in your position begin operating as a sole owner or corporation. I would suggest consulting with a CPA or construction attorney to determine which option is best for you. Articles of Incorporation must be filed with the Secretary of State while a Sole Proprietor will need to register his or her Fictitious Business Name (FBN) with local government.

The standard contractor bond is $12,500 and could cost as little as $79.00 depending on your credit. CSLB fees for a new license are $400 if you apply prior to July 1st (state fees go up after that date!). The initial fee to register as a corporation is $100.00 (more if you want over-the-counter expedited processing).

Q: We’re members of our local Builder’s Exchange and I was hoping to get a legal question answered. My husband has a Class “A” License and owns his own company, which is a Sole Proprietor. I have a related service company that requires no contractor’s license and is a Limited Liability Company (LLC). Recently my company hired an employee that can service and repair septic systems. How can my company use my husband’s class “A” license for this service? Can we put his license number on our invoices or would he have to be a member of the LLC? Thanks so much for your help on this matter and I look forward to hearing from you soon.

A: I cannot give you “legal” guidance since I am not an attorney. I can however give you sound contractor licensing advice.

An “A” can work on most any type of sanitation system, including septic or sewage. This being said, you cannot combine any construction business with a LLC. According to a recent Construction Industry meeting I attended at the State Capital, contractors will likely not be able to obtain a LLC license until January 2012.

You may want to consider having this employee work under your husband’s “A” license and apply for your own LLC license in January.

Q: I have held a sole owner “B” license for many years and I have “Construction” in my business name. I qualified for a “C-17” a few years ago and now almost exclusively handle new and replacement windows. I would like the business to reflect this. Would it be a problem to simply start contracting under an alternate name?

A: It would only be a problem if you use this alternate name without first filing a name change or new license application with the CSLB. You cannot do business under two names using one contractor’s license number.

If you have no interest in using your current license name, a name change is by far the easiest and quickest option. If you want to retain the “Construction” business, then apply for a second license, which reflects your specialty trade.

SWIFT Enforcement, License Renewal & CSLB Update

The ability to do business as a contractor is a privilege. The contractor’s license certifies your legitimacy. For consumers, the license is protection against shoddy work and the unscrupulous posing as legitimate contractors. SWIFT action recently showed some of the unlicensed contractors coming to a home near you are often breaking more than one law…

The CSLB conducted a “California Blitz” in 10 cities between March 8th and 10th. A total of 135 suspected unlicensed contractors were arrested during the statewide undercover operation putting a glaring spotlight on the severe risks California consumers take when they hire unlicensed operators to work in and around their home. The stings were conducted in Kings, Madera, Marin, Monterey, Orange, Riverside, Sacramento, San Diego, Shasta and Tulare counties.

Two of those arrested were registered sex offenders. Investigators also found that two others from Shasta & Tulare Counties had “No Bail” warrants and were taken to jail. Another suspect in Tulare County was hauled off to jail after it was discovered that he had eight different arrest warrants for driving under the influence and other traffic violations. Another suspect caught in the Kings County sting had a $50,000 arrest warrant and was carted off to jail.

During the “Blitz” investigators from the Board’s Statewide Investigative Fraud Team (SWIFT) posed as homeowners or landlords, asking for bids on projects that ranged from landscaping, concrete, and fencing to painting, gutters, garage doors, cabinets, tile work, and tree trimming. Those who bid more than the legal limit of $500 for labor and materials or were not in compliance with other regulations faced a misdemeanor charge of contracting without a license and a Notice to Appear (NTA) in Superior Court.

The goal of CSLB’s twice-yearly blitz is to educate consumers about the dangers of hiring phony contractors, and to encourage people who qualify and want to work in the construction trades to get their contractor license. Local prosecutors and law enforcement agencies, as well as the California Department of Insurance, Department of Toxic Substances Control, and the Department of Homeland Security’s Immigration and Customs Enforcement assisted the CSLB with these sting operations.

Q: I just learned that my license was not renewed last month. I don’t know how this happened since I’m very careful to make sure this gets taken care of promptly. I did move 6 months ago and thought I had informed the Board of this fact. Now a contractor is refusing to pay me and is even threatening to go to court since I’m operating under an expired license. Please help me get this straightened out as soon as possible.

A: The license renewal is the lifeblood of contractors. Without an active license, a contractor should not be working and in fact should stop ALL current projects. Further, as you discovered, your company may be subject to severe financial penalties. My research indicates that the CSLB still has your prior address on file. In most cases the postal service will not forward these mailings, so the renewal was undoubtedly returned to the Contractors Board.

I could not determine if the Board ever received your address change. At this point, you can request that the renewal be sent to the correct address or have someone pick it up in person on your behalf. You can also fly up to Sacramento and take care of this personally. Whatever you decide, I strongly recommend that you request a ‘retroactive renewal’ pursuant to B&P Section 7141.5. This must be in writing and must be done within 90 days of your expiration date.

The Registrar of Contractors has periodic meetings with the Construction Industry. A report on last weeks meeting will be covered in an upcoming column. Issues discussed included CSLB sponsored legislation, updates on licensing issues including LLC implementation and the Board’s Sunset Review.

General, Specialty & Application Fee Number

Have you ever been frustrated by an online resource that was less than ‘user friendly’? While having access to information on the web is convenient, computers still can’t perform some tasks as quickly or as well as people. Having to access important information you need as a contractor should never be ‘detoured’ by a problematic website error. We begin by ‘demolishing’ some misconceptions about when a General can tear down a house?…

Q: I have followed and enjoyed your Q & A column for years. Could you please answer this question? I am a California “A” licensed contractor interested in bidding a project for demolition work. The scope of work involves tearing down a few old vacant homes as well as breaking up the nearby sidewalks. Can I bid as a subcontractor with just my “A” license or would I also need a “C-21”?

On a separate note, what if someone asked me to bid as a sub for demo-type work inside of an inhabited building. For instance, tearing out a school classroom or demolishing the inside of an existing small office building. Would I need a “C-21” or would my “A” license be satisfactory?

A: Thank you for reading my column. I am glad you’ve enjoyed it during these many years.

To handle either of the demolition projects you describe in CA would require a “C-21” license. However, an “A” could likely handle Scenario #1 if the main project is related to General engineering and where the home demolition is incidental and supplemental to completing the project.

For instance, lets say you contract to perform site grading and installation of underground utilities for a new home subdivision. To complete the project you may be required to level the existing homes. Since this is incidental to the primary work, and would likely be a relatively small portion of the project, an “A” should be able to perform this.

Regarding your second scenario, tearing out the inside of a building, a “C-21” would definitely be needed to handle this type of demolition project.

Q: I have a “B” license. Is this enough to build a gas station or do I need another classification?

A: A “B” contractor can build most any structure that involves 2 or more unrelated trades (other than framing or carpentry). This would include a gas station.

Q: We recently submitted our application to the Contractors Board to replace our Responsible Managing Employee (RME). I was told that the Board would not accept the required Bond for the new Qualifier without an “Application Fee Number”. Okay, how do I get this number? Every time I go to their web site, it tells me “we are unable to process your request at this time.” After this happens a dozen times, I throw up my hands and “try again” later with the same result. Any suggestions?

A: The Board has made it very simple and fast for a consumer or contractor to look up an existing license number on line (as witnessed by their “Check The License First” media campaign). Unfortunately, this is not the case for looking up the application fee number. I have spoken with numerous folks who have experienced the same problem, so if it’s any consolation, you’re not alone.

Your options are: a) wait until the Board sends you a letter with this number (and a PIN); b) call the Board and see if you can through to someone who can give you the number over the phone; or c) try to look the number up at 10:52pm when the computer system is not being overloaded (I just tried “c’ twice but received the same error message).

I have spoken with and written to the Board about this problem and will let my readers know if and when the situation changes. In the meantime be aware of this ‘glitch’.

Qualifying Experience,License Expiration & New Applications

As I have advocated for many years, ‘knowledge is power’, but as another old axiom also advises, ‘timing is everything’. A friend added to that common wisdom by reminding me that being in the ‘right place at the right time’ is important but taking action at the ‘right’ moment is critical, because ‘time waits for no one’ or as the case may be, no contractor. Today one contractor finds time is not on his side, while another seeking a license learns that ‘experience’ can change time…

Q: I had a contractor’s license but it was suspended several years ago. I would like to get it back now that I’m working on my own. My license number is 61XXXX. What will be required? Will I need to take the test again?

A: I wish you had called last week. I’m sorry to tell you that your license was not suspended; it expired. This was 5 years and three days ago. This license number can be reassigned; however, since a license is only renewable for 5 years, you will be required to retake both the law and trade exam.

Contractors whose license has been expired less than 5 years can simply file a renewal application and pay a delinquent renewal fee (presently $450.00 for an active license). In your case, a new Application for Original License must be completed. Since you have previously been licensed no additional Certification of work experience will be required; however, as indicated, passage of the law and appropriate trade tests will be necessary. CSLB fees presently total $400.

Contractors Note: the above referenced license was a Sole Proprietorship. If it had been a corporation or partnership, the process would likely be more complex. If you are in a similar situation or have any questions please contact me to discuss your specific requirements.

Q: I hope to apply for my new contractor’s license soon. I’ve never been licensed but understand most of the application process. My problem is I don’t have the required four years experience (I’m about 10 months short). Is there a way to apply now or will I need to wait until next year.

A: You’re not alone in wanting to become licensed NOW rather than waiting an extra year or more. Sometimes, those I talk with must wait until they have the full four years field experience while for others there is an alternative. The CSLB will allow education or a completed apprenticeship program to be used in lieu of some experience qualifications. As we discussed, since you have an engineering degree, the Board will grant up to 3 years “experience” depending on the classification you want to apply for. There are many other degrees where the Board may allow 2-3 years credit including business, public administration, building technology, architecture, and horticulture, to name a few.

You indicated that you hope to apply for this license “soon”. I might suggest doing so before July to save a little money. On average, most all fees associated with first-time applicants, renewals, certifications, etc. will increase 20% or more on July 1st (more on this in a future column).

License Expiration, Corporate Assignment & Family Waiver

Deadlines are called that because after that set day or time, it’s over. No further discussion, done deal. For contractors, government rules and deadlines for paperwork are serious. To paraphrase Donald Trump, ‘everyone deserves a second chance’ may be a nice idea, but government means business when they require you to follow the rules or face the consequences …

Q: I was the Responsible Managing Officer (RMO) on a license (“B”) that expired. The CSLB told me that I could be issued a new personal license with the same Class “B” without any tests as long as it was within 5 years. Is this true and is it possible this could change if I wait?

A: You got the right information from the Contractors State License Board. They were referring to B&P Code 7141 which states in part, “…a license that has expired may be renewed at any time within five years after its expiration date by filing an application for renewal…” I do not believe this law will be changed; however, if you wait beyond the five years — EVEN BY ONE DAY — you will be required to file a new application for original license and retake the applicable state exams.

Q: We have a client who has an individual contractor’s license and wanted to use it with a corporation (which he owns 100%). I understand there is a simple form by which a sole proprietor can have their license re-issued to a corporation. What happens if he changes his mind down the road?

A: When dealing with the CSLB, or for that matter any state government agency, nothing is ever simple.

When an individual applies for a corporate license — and owns at least 51% of the company — the CSLB requires that the applicant complete the form “Licensed Sole Owner Applying For Corporation”. This asks the contractor to check the box marked “YES – Reissue my sole owner license number” or “NO – DO NOT reissue my sole ownership license number … Please issue a new license number to the corporation”. If the sole owner elects to have his license number reassigned, it will forever be tied to the new corporation.

Q: My father is currently the owner of the company and wants to know how we would go about making me the Responsible Managing Officer (RMO) so that if anything happened to him, I could stand in and the company would continue to operate without penalties. One of your past columns indicated that because I am his son I would not have to take the contractor’s license test. Can you help?

A: I am glad you were able to find this information. Most of my past columns are posted at www.cutredtape.com for people to review and search by topic.

What you heard is partially correct. B&P Section 7065.1 (b) does allow for the transfer of an INDIVIDUAL (sole owner) contractors license from father to son — with a waiver of the law and trade exam — in case of the absence or death of the licensee. However, since your father qualifies a corporation, the license belongs to the company, not your father as an individual.

B&P Section 7065.1(c)) would still apply to your situation in that it allows for the replacement of the existing qualifier on a CORPORATE license even if the person is not a close relative. In both instances, the new qualifier must have worked for this company (or individual) in a supervisory capacity for 5 of the past 7 years in the same classification(s) presently held by the licensee. Note, a waiver can be applied for but is not automatic.