Paying RME’s,Getting LLC’s and Changing A Sole Owner License

We speak volumes of words to each other each day, but one word makes all the difference when written into contractor’s regulations. It’s been a whirlwind of change as contractors nail down the benefits of operating under the new LLC (Limited Liability Company) rules now available in California…

Q:  I have a current General Building license and I am trying to find out if I can pay my RME as a 1099 Independent Contractor.  The reason for this is that we don’t have work year-around and we just plan to pay him piece-meal when we have a project.


A: RME stands for Responsible Managing Employee.  1099 forms are typically used when you are paying someone who is not your employee.  An RME must be a bona fide employee of the firm and be regularly employed by the firm and actively involved in the operation of the business at least 32 hours per week or 80 percent of the total business operating hours per week, whichever is less.  That being said, there is no wage requirement for RME’s so technically you can pay him “piece-meal” as long as he is on payroll and receiving wages at least 80 percent of the time that you are actively engaged in projects.


Q: I am an attorney and my firm has used your company several times in the past to assist my clients with CSLB issues.  I am in need of your assistance again.  One of my clients, an engineering firm with a General Engineering “A” license, is currently structured as a corporation in California.  They want to continue to operate as a corporation, but they plan to form a LLC to own the corporation, as opposed to the individuals have direct ownership.  Is this possible?


A:  The CSLB does not have any rules or regulations with regards to who can or cannot own a licensed corporation.  When applying for a license, the CSLB does require you to disclose how much equity the qualifying individual has in the company (if any), however they do not look in to ownership beyond that.  As long as your client intends to continue to do business as a corporation, and not as an LLC under the guise of a corporation, there is no need to inform the CSLB of the ownership transfer.

Q: Is there any way to change a sole proprietorship license to a different entity without re-applying for a new license?

A: Any time you change or form a new entity you are required to re-apply for a contractor’s license.  In certain circumstances you can request that a sole proprietor license number be transferred to the new entity, but that still involves re-applying for the license. Please feel free to call our office if you’d like assistance in this process.