Consultant’s Licensing, Filing Corporate Minutes & Qualifying ‘Sisters’

While we have previously mentioned that contractor’s law in written in black and white, as readers know, there is a middle ground. This is one reason expert opinions are required, as the ‘gray’ areas can be loopholes or quicksand for contractors! These ‘spaces’ in the written law also are exploited by some who just want your money…

Q:  I read your column in the North Coast Builder’s Exchange newsletter and we used your company to help us get a license for a new division of ours.  We are a construction manager for an owner in Oregon and we are not the entity that contracts with subcontractors.  Are there any licenses, besides the applicable local business licenses, that we need to have?

A:  Thank you for contacting Capitol Services and following our column in the North Coast Builder’s Exchange newsletter.  The answer to your question has ‘historically’ always been somewhat of a ‘gray’ area.  Some might say that it depends on exactly what type of work you are doing.  However, there was a bill that passed in 2013 that specified the term “Contractor” to include consultants who provide or oversee bids, or arrange for and set up work schedules and maintain oversight of a home improvement project.  That being said, if you are doing these duties you should hold a contractor’s license.

Q:  Capitol Services is currently helping me obtain my license and I received the Annual Minutes Requirement Notice from the Corporate Compliance Center that is due by the end of the month. I assume we are to mail it back and pay the fee?

A:  It sounds like you received a ‘solicitation’.  While you may want to keep annual minutes internally, these minutes are not filed with the State nor are you required to use this company to prepare your corporation’s annual minutes.  I am also not aware of any “due date” for annual minutes.  As we are not attorneys and cannot provide legal advice, it’s best if you contact a business attorney if you have further questions regarding this subject.

Q:  Can we use an employee from one of our sister companies to Qualify a new license, or is that individual required to be employed by the license holder?

A:  The CSLB requires that the Qualifying Individual be employed by the entity for which he/she acts as the RME/RMO.  There is no limitation that would restrict that individual from being employed by both entities as long as he/she complies with Board requirements for acting as the RME/RMO.

 

 

Documenting Experience, Pressure Lines, Qualifying More Than One License & Expediting AZ Licenses

As a contractor or applicant keeping your address current at CSLB, documenting the work you do and learning licensing rules and regulations are also parts of a contractor’s work. Getting important paperwork or notices, proving experience and operating legally are necessary. However, some practices may change without much notice, until your needs require it. That’s one reason we share expertise here. Other ‘high pressure’ questions and answers lead us to finish in AZ, where it’s ‘take a number’ in applying for a license…

Q:  A friend of mine took the CSLB exam six years and didn’t pass.  Now he’s been in the trade for a total of 14 years and he recently re-applied for a license.  He states that the CSLB will not let him sit for the exam again due to not being able to produce records of four years of experience.  My question is, if the State allowed him to sit for the exam six years ago, why not now?  Has the CSLB changed the rules?

A:  That’s two questions! But the CSLB has not so much “changed the rules.”  They still (and always have) require that an applicant display at least four years of full time work experience within the last ten in the trade they are applying for.  However, they do require more documentation now than they did six years ago.  In addition to the work experience page that has always been required, they sometimes now request additional documentation such as W-2’s, contracts, permits, etc.  If an applicant cannot produce such documentation, they do not qualify to sit for the exam or obtain a license.

Q:  I’m applying for a “C-4” (Boiler) license.  Will that license allow me do natural gas lines and compressed air?

A:  As long as the work is for the proper function of the boiler system you are installing, yes, you can run gas and compressed air lines.

Q:  I know a person can only Qualify up to three firms at a time but is there any limit to how many joint ventures a firm can qualify?

A:  A person can Qualify up to three firms at time only under certain circumstances, but no, there is no limit to how many JV (Joint ventures) licenses a firm can have.

Q:  We are in need of an Arizona Contractor’s license ASAP.  Do they have an option to pay extra to have your application expedited?

A:  Unfortunately the AZ Registrar of Contractors does not have that option.  They process license applications in the order received.

RMO Transfer In Family, “C-36”, “C-42”, “C-12” & What Work Handy-People Can Do

We ‘salute’ our first ‘Officer’ as a contractor who seeks a way to hand on his license to a son. A Plumber won’t ‘dig’ the answer on a public works bid for a county project and there isn’t any kind of work a ‘handy’ person can’t do within a specific limitation…

Q:  I have a question about phasing out our company. I am now the listed RMO (Responsible Managing Officer) on my license. My son who has been an Officer since 2000 would like to take over as RMO. Will he be required to do any testing?

Second question: If he wishes to add any classifications will he be required to take the law test as well as the classification test?

A:  Since your son has been an Officer on the license for over five years, he can apply to replace you on the license and request to waive the law and trade exams. Keep in mind that this is a request and not guaranteed, but we can assist you with the paperwork and the request letter if you’d like.

With regards to adding classifications to the license in the future, once he is the RMO on the license he will not be required to take the law exam to add a classification.  The trade exam for additional classifications will likely be required.  In certain circumstances, if the trade is closely related to the classification currently held, a contractor can request to waive the trade exam, however keep in mind that each licensee can only request a Waiver of an exam once every five years.

Q:  I currently have a “C-36” (Plumbing) and “C-42” (Sanitation Systems) license. I have been doing work in Marin county since 1974.  The county of Marin’s permit department is telling me I need a “C-12” (Earthwork and Paving) license to repair a sewer line in the street.  I have always thought that my other license covered this type of work. None of the other cities are requiring me to have a “C-12”, just the county of Marin. Do I need an Earthwork and Paving license to excavate a hole 2 feet wide, 8 feet long, and 4 feet deep?

 

A:  Thank you for contacting Capitol Services Inc.  You can perform incidental street work while performing the installation or repair of sanitation or sewage systems with your “C-42” license.  Unfortunately, the CSLB doesn’t have jurisdiction over what the counties require and many counties are requiring other licenses ranging from the “C-12” to the “C-34” (Pipeline) classification to even the “A” (General Engineering) classification.  If you can show at least four years of work experience doing “C-12” work, we can assist you with the process of adding this classification to your license. A trade exam would be required.

Q:  I am a handyman and I do minor repair work, always under $500.  Is there any type of work, such as electrical, that I am not allowed to perform without a Contractor’s License?

A:  I am not aware of any specific trades that you cannot perform, as long as the project is under $500, labor and materials combined.  Keep in mind if you are advertising for doing this type of work, you are required to state in your ad that you do not hold a California Contractor’s License.

“C-4”, Referral Fees, Automatic Gates & General Contractors

There is nothing so satisfying as hearing from our readers, especially those with an issue all contractors should be aware of in doing business. This ‘automatically’ rose to the top of our Q/A today! We also visit the ‘hardware store’ and relieve the ‘pressure’ for two other contractors with questions…

Q:  In your Capitol Connection publication for the week of 1/18/16, you wrote the following in response to a question:

B & P Section 7027.1 prohibits contractors from advertising for construction work outside of areas for which they are licensed.  The CSLB uses the example that a “C‐29” Masonry contractor who advertises to do electrical work can be charged with a misdemeanor ‐ unless he or she also has a “C‐10” Electrical contractor license. The only exception to this provision permits licensed “A” (General Engineering) and “B” (General Building) contractors to advertise as General contractors.

We have a “C-61”/”D-28” (Doors, Gates, and Activating Devices) license and install automatic gate systems. I would estimate that at least 75% of our competition comes from contractors with licenses other than the correct one. These include fencing, structural steel, electrical, and ornamental iron licenses. They are even hired by GCs to install automatic gates. It seems to me that as long as a company has a license of some kind, the CSLB leaves them alone. This can easily be ascertained by looking at advertising and checking what license they have. We are not looking to create enemies, but the automatic gate industry has safety standards that these companies either ignore or don’t know about, creating the possibility of serious injury to the public. What can be done about this?

 

A:  There are actually several classifications that are authorized to install all or part of automatic gate systems.  In addition to the “C-61”/”D-28” classification, a “C-28” (Locks and Security Equipment) can perform this work, and excluding the electrical components, a “C-13” Fencing Contractor can install the gates.  A

“C-10” (Electrical) contractor can install the motors that run the automatic gates.

If there are other contractors performing this work “out of classification”, the CSLB would need a formal complaint filed so they can investigate it. The public, including licensed contractors, are the ‘eyes and ears’ of law enforcement.

Q:  I have a scenario to run by you that I’m hoping you have some insight on.  There is a local hardware store which has contracts with tradespeople (mostly licensed contractors, some unlicensed ‘handymen’) that stipulate a fixed percentage fee to be paid from any jobs being referred to that tradesperson.

They are a licensed General Contractor. They are also a Hardware Store. Is it legal for them to accept referral fees from Licensed GCs?

If it’s not legal, would canceling the GC license make it legal?

A:  Referral fees exceeding $5 between two contractors for the procurement of a home improvement contract are unlawful.

However, in discussions with the CSLB, if the hardware store is acting as a retail establishment and not a contractor the prohibition would not apply. The hardware store does not need to cancel their license, only not have contracted with the homeowner. For example, if they responded to a plumbing leak and then referred a general contractor to repair the water damage.

Q:  I am in the process of applying for a “C-4” (Boiler) license but I want to make sure that I’m applying for the appropriate classification.  Can I do natural gas and compressed air lines with the C-4 license?

A:  If the work is for the purpose in proper functioning for the boiler systems you install, yes, “C-4” contractors can run gas and compressed air lines from already existing lines to the system.

Qualifier Responsibility, ‘Sister’ Company Licensing & Traffic Control

While we have ‘plowed the ground’ on RME/RMO, it’s an area that always requires more answers than space allows. Answers often ‘grow’ new questions for readers. We give another contractor his wish in ‘passing’ the trade exam for a new classification. While they may be ‘married’ thru the corporation, ‘sisters’ can’t share the license!…

Q:  We are a Georgia corporation and are in need of a California Contractor’s License.  In the interest of timing we have hired someone who has an Inactive license for the purpose of acting as our Qualifying individual.  We are unfamiliar with the difference with regards to responsibility between an RME (Responsible Managing Employee) and RMO (Responsible Managing Officer).  If he lives in Southern California and we plan to have work throughout the State, how does that work?  Can you provide us with any insight on this matter?

A:  Whether an RMO or RME, the qualifying individual must be a bona-fide employee of your company and actively engaged in the business operations.  The CSLB requires that an RMO exercise direct supervision/ control of the construction activities.  That doesn’t mean that he/she has to be, but the CSLB requires that he/she perform any one or combination of the following activities: supervising construction, managing construction activities by making technical and administrative decisions, checking on jobs for proper workmanship, or direct supervision on construction sites.

RME’s have the same responsibilities, however in addition, RME’s must be employed at least 32 hours per week or 80% of the total hours per week you are actively working. Readers please call for further assistance or additional questions.

Q:  Based on B&P Code Section 7075.1(c)(1), can a corporation who is currently licensed transfer their license number to another corporation if they owned by the same Parent Company?  The Parent Company formed a new subsidiary and they want to transfer one of it’s other subsidiary’s license number to the new entity?

 

A:  The CSLB will only transfer a corporate license number to another corporation under very few circumstances.  Section 7075.1(c)(1) refers to mergers as well as changing filing status with the Secretary of State from domestic to foreign or vice versa.  “Sister” companies cannot transfer their license number from one to the other under this code section.

Q:  We have been an “A” (General Engineering) license holder since 1995.  A new contract that we want to bid on requires that we also have a “C-31” (Traffic Control) classification on our license.  Would I qualify for a Waiver of the trade exam based on my “A” license?

A:  B&P Code Section 7065.3(c) allows the CSLB to consider a Request to Waive the trade exam when adding a classification to your license if the additional classification is closely related to the license currently held.  You will need to show that the additional classification is a significant component of your construction business, which is typically done with project lists specific to, in your case, traffic control.  Additionally, your license needs to have been Active and in good standing for at least five years.  All that being said, it appears that you would be a good candidate to qualify for a Waiver of the “C-31” trade exam.

DBA Name Change, Parent Company, GC’s & Specialty Advertising

From the newest licensed contractor to industry leadership, everyone needs an expert opinion now and then. We hold a ‘parent’ 100% responsible for the latest addition to their family, while making an ‘example’ of another contractor on using solar in a business name…

Q:  I work for the Contractor’s Association and I believe you’ve answered this before, but the issue came up again at our January membership meeting last Wednesday.  My committee wants to know if it is illegal for a GC to advertise as a specialty contractor if they don’t have that particular classification on their license, and where it is stated in the CSLB’s Contractor’s License Law and Reference Book?  Can you tell me where I can find that information?

A:  B & P Section 7161 of the California Contractor’s License Law Book states that it’s a misdemeanor to use false, misleading, or deceptive advertising.  If a General Building (“B”) contractor advertised as a Plumbing contractor for instance, that would mislead the public to believe that the “B” contractor can perform plumbing work alone, which is not the case.

B & P Section 7027.1 prohibits contractors from advertising for construction work outside of areas for which they are licensed.  The CSLB uses the example that a “C-29” Masonry contractor who advertises to do electrical work can be charged with a misdemeanor – unless he or she also has a “C-10” Electrical contractor license. The only exception to this provision permits licensed “A” (General Engineering) and “B” (General Building) contractors to advertise as general contractors.  I hope this clarifies the issue for you and the committee.

Q:  We have a corporation that is currently licensed in Arizona.  Our Parent Company recently formed a new subsidiary that we also need to get licensed in Arizona.  Can we use the same Qualifying individual that we have on our current license for the new entity’s license since they are both owned 100% by the same Parent Company?

A:  Yes, you can use the same Qualifying party on two licenses as long as there is common ownership of at least 25% of each licensed entity for which the person acts in a Qualifying capacity.  Since both licensees are owned (more than 25%) by the same entity, it meets the common ownership requirement. 100% correct!

Q:  We have a “B” (General Building) license and we do solar work.  Our business name as registered with the CA Secretary of State is not descriptive of the work we so we have been operating with a “dba” (doing business as) of “ABC Solar”.  I was recently informed that if that’s how we operate and advertise then we need to add that as the”dba” on our Contractor’s License.  How do we add that to our license?  Our “doing business as” name is already registered with the County.

A:  In order to add a “dba” name to your license you need to complete and submit a name change form to the CSLB.  The new business name will be your company name as registered with the Secretary of State followed by your dba name.  However, although “A” (General Engineering), “B” (General Building), and “C-10”’ (Electrical) contractors can perform solar work, they cannot use the word “solar” as a stand-alone word. “C-46” (Solar) classification holders are the only classification that can use “solar” in their business name without providing a descriptive or limiting word.  For example, a “C-10” contractor can use “ABC Electrical Solar”, and your company as a “B” classification holder could use “ABC Solar General Builders” or something of that nature.

 

NV Bid Limits, Financials, Pest Control and “C-17” Licensing

One for all and all for one, as we help school contractors with an ‘on the money’ tip.  While we are based within sight of the CA Capitol Dome, many of our questions come from areas we also serve with contractor’s licensing assistance including AZ & NV…

Q:  Does Nevada’s monetary limit refer to the amount you are allowed to bid on, or the amount of the contract?  Also, does the limit refer to one job or all the work you have in progress?

A:  Nevada licensed contractors cannot bid on or contract in excess of the monetary limit that is assigned to their license.  The monetary limit refers to the maximum amount that a contractor can undertake on a single construction site or subdivision site for a single client.  Therefore, for instance, if you have a monetary limit of $1 million, you can have multiple jobs in progress as long as each of them is under $1 million.

Q:  Do you know what the licensure requirements are for pest control?

A:  A contractor’s license is not required to do pest control.  Beyond that I am unaware of the licensing requirements.  I would suggest contacting the California Department of Pesticide Regulation www.cdpr.ca.gov.

Q:  We have several licenses in Nevada that are coming up for renewal next month.  When we obtained the license, we were required to provide financial information, which being a newer business we didn’t have at the time.  We used one of our sister company’s financial information to qualify and it shows that entity on our license as the indemnitor, (or co-signer guarantor).  That company no longer exists.  How do we go about removing them from the license?  Also, we have cash bonds on our licenses that we would also like removed.  Is that possible?

A:  To remove an indemnitor, you would need to submit a letter signed by an Officer listed on the license requesting to remove the indemnification along with the appropriate financial statement for your company.  You can replace the cash bonds by submitting Surety bonds instead, but the Nevada Board will maintain the cash bonds for two years due to the statute of limitations for any work done while the cash bonds were in place.

Q:  I have an active “B” (General Building) and “C-17” (Glazing) license.  I am working for a consulting firm that wants to do some limited “C-17” contracting.  I want to associate my “C-17” classification as a Responsible Managing Employee (RME) with this consulting firm.  Will my General license remain active while the “C-17” is assigned to the company?  Will there be any problem re-instating me if and when I want to disassociate from the company license?

A:  As an RME you would be required to inactivate your personal license, which would include both the “B” and “C-17”.  As long as your personal license remains on Inactive status and all the other licensing requirements are met (bonds, etc.), you shouldn’t have an issue reactivating it once you disassociate from the company license.

Articles of Incorporation, RMO Liability, Installers Licensing and Bond Amounts

Happy New Year! We are all about contractor licensing this year, last year and for more than 30 years!  Capitol Services has been assisting contractors with the complex issues and aspects of applying for and keeping your license to bid and work in CA, AZ and NV. For our first question of this new calendar…

Q:  Can you tell me what the turnaround time is for filing Articles of Incorporation with the Secretary of State?  We are hoping to get a new corporation formed quickly without having to pay the $350 expedite fee.

A:  They are taking about 7 business days right now, so you should be able to make that happen.

Q:  I have a personal contractor’s license and my company would like me to be put on their license as an RMO (Responsible Managing Officer).  If the company were ever to have a complaint filed against them or be sued, could it affect my Sole Proprietorship license?

A:  The Responsible Managing Officer does hold some liability for complaints, claims, and judgments against the license.  So yes, the status of the company license has the potential to 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 are listed on.  For example, if the company were to ever have an unsatisfied judgment that resulted in the CSLB suspending their license, it is highly likely the CSLB would also suspend your Sole Owner license.

As always, we recommend that you contact a construction attorney to discuss the legal liabilities associated with acting as a Responsible Managing Officer.

Q:  My company currently manufactures machines that clean, de-shells, and prepares walnuts, almonds, and other types of nuts for sale.  We are looking to start installing the machines as well and need to know what type of Contractor’s License will be required.  The machines are concrete inlaid, bolted to the ground, and we would be installing the motors and conveyors (which requires some electrical wiring), installing fans for the dryers, piping, etc.

A:  Based on what you described, the “A” General Engineering classification would be the most appropriate license. Let us know if we can assist you.

*Contractor Reminder*

 Recently passed Senate Bill 467 raised the amount of contractor’s bonds from $12,500 to $15,000.  This change became effective January 1, 2016.  We encourage all contractors to make sure that they have their new Bond or cash deposit in place to avoid the risk of having your license suspended.  Many Surety companies have a Blanket Endorsement on file with the CSLB, which means Bonds for their clients will automatically be increased to the $15,000 amount, without any action required from the Contractor.  However, if your Surety company is not one of these companies, it is important that you contact them immediately.  A list of the companies that have a Blanket Endorsement with the CSLB can be found online at http://www.cslb.ca.gov/Media_Room/Industry_Bulletins/2015/December_3.aspx.

This new legislation also eliminated the requirement for applicants to prove that they have $2,500 in working capital in order to obtain/maintain a license.

CA License Exams in A Different Language, Signing Off Experience, RME’s JV’s & RMO’s

While the contractor rules and regulations may seem like they are written in a foreign language, you can actually ask for a ‘translator’ when applying. Do you have the ‘write’ stuff to qualify your experience in applying? We also show how you can qualify two licenses in a RME/ RMO shuffle…

Q:  I am interested in applying for a Landscape license but I don’t have the required four years of experience.  My Dad is willing to be the RMO (Responsible Managing Officer) but would it be possible to have my dad take the exam in a different language (Chinese) or have translator assistance?

A:  The Contractor’s License exam is only administered in English however applicants can request a translator to read the exam for them.  The front page of the license application has a box to check to request the use of a translator, and once your application is approved, the CSLB will contact your Dad prior to his exam regarding his request. The translator must also be approved in advance by the CSLB.

Q:  When applying for a new license, is it required that I have a licensed contractor sign off on my experience?

A:  While it’s better to have a licensed contractor, and preferably your employer, ‘write’ off on your work experience, it’s not a requirement.  Your certifier can be an employer, fellow employee, journeyman, union representative, contractor, client, or even business associate.  The requirement is that your certifier have “direct knowledge” of your experience during the time period you list.

Q: Our corporation has formed a new subsidiary; 50% of the new company will be owned by our currently licensed corporation, and the other 50% will be owned by an individual.  We would like to use the same RME for both companies.  Is that allowed?

A:  According to B&P Code Section 7068.1, an individual can Qualify two licenses if the additional firm is a subsidiary of or a joint venture with the first.  The CSLB defines a “subsidiary” as one entity owning at least 20% of the equity of the other.  Be aware that in order to qualify for this, the majority of the Partners, Officers, or Managers must be the same for each company.

Q:  According to my research, an RME is required to work at least 32 hours a week (or 80% of the total hours the business operates).  After the first of the year we would like to bring our RME down to a part time employee.  How can we go about this with the hour requirement?

A:  You would need to designate your RME as an Officer of the company and change him from an RME (Responsible Managing Employee) to an RMO (Responsible Managing Officer).  You have 90 days from the time the change becomes effective to notify the CSLB.  Contact our office if you’d like assistance with this process.

Q:  Can you obtain a copy of our renewal application quickly?  Our license expires at the end of the month and we haven’t received it in the mail yet!

A:  Yes, we can pick it up for you in person.  The CSLB is currently taking about four weeks to process renewals so we suggest getting it submitted asap.  They usually send it to you about 60 days prior to your expiration so you may want to ensure that the CSLB has your current address.  If not, you can update that on the renewal application.

Alien Contractors, Corporate Licensing & Update on Bond Limits

Seen any ‘alien’ contractors? The truth is out there somewhere as our first contractor helps us learn. A new direction has a corporate contractor seeking to take one step back, before moving forward into the future just in case…

Q:  When the CSLB approves licensure for an individual have they also determined that the person is not an illegal alien?  The reason that I’m asking is a company that we may work with is asking us to represent and warrant that our independent contractors are not illegal aliens.  Therefore, we thought that if the CSLB licensure process confirm legal residency that we wouldn’t have to worry about that (at least for our licensed contractors).

A:  No, while the CSLB does require that you disclose your Social Security Number or Individual Taxpayer Identification Number, they do not verify if the applicant is an illegal US resident.

Q:  I’ve been a California “B” (General Building) Contractor for the past 11 years, or rather, I have been the Qualifier for my corporation.  I recently took a full time position working for a business that utilizes my trades skills but I don’t require a license.  I am closing the corporation by the end of this year to avoid paying future state corporate fees, income tax fees, etc.  From what I can tell, this will also terminate my connection with the corporate license.  While my new position is going well, I want to keep an active license ‘just in case’ or if side work pops up.  Do I have to reapply for a new license?  How long do I have before having to go through the full requalification process?  I am thinking a ‘sole proprietor’ would be the least expensive, lowest maintenance license to maintain with just a bond requirement.

A:  Congratulations on your new position!  You are correct that once you dissolve the corporation, you are unable to contract with that corporate license.  Since you are closing the corporation, yes, you would need to re-apply for a new license.  Keep in mind that you have five years from the time you Disassociate from one license to apply for another without needing to re-test.  If you don’t intend on using the license and only keeping it ‘just in case’, you may want to obtain a Sole Proprietor license and request it be issued inactive.  In that case you wouldn’t even need to obtain a Bond.  Inactive CA Contractor’s Licenses do not require a Bond or insurance requirements.  Good luck on your new venture!

Important Contractor Update!

On January 1, 2016, bond amounts for Contractor’s Bonds are increasing from $12,500 to $15,000.  Make sure you get your new Bond or cash deposit in place before the first of the year or you run the risk of license suspension!

Bonds for Qualifying Individuals who own less than 10% will remain at $12,500.