A Cautionary Tale on Licensing and Ownership for Contractors

It’s a rude awakening to discover but this contractor has twenty thousand reasons to be upset about the drama, and ‘suspense’ his partner created. Solving this tragic turn of events won’t be one ‘act’. As we all learn from his story, like liberty, the ‘price’ of good partners is eternal vigilance, or keeping eyes wide open…

Q:  I went into a contracting business with my partner years ago.  He is the RMO (Responsible Managing Officer) of the company and I am the President.  I have basically been running the business since its inception.  I recently framed out an entire commercial building and the project owner still owes me more than $20,000.  

I went to collect my money when the project was finished, and the project owner is claiming that my license is not valid (Active) so he is not going to pay me.  I looked up my license online and unbeknownst to me, the license is Suspended. I called my partner and he informed me that towards the end of last year, he changed the company from a Corporation to an LLC, obtained a new license and removed himself from our license. Talk about poor communication, I had no idea he did this!  

However, I’m confused because I had my wife call the CSLB, and they told her that my partner is in fact still listed on the license as the Responsible Managing Officer (RMO).  He is on both the corporation’s license andthe LLC license was what she was told.  The person she spoke with said that my license is Suspended because of a Franchise Tax Board (FTB) issue.  I’m obviously somewhat in the dark with the licensing matters and I just need some help to straighten this out.  To make my long story short, I want to get paid!

A:  Wow! After researching both licenses, it seems as if all parties are a bit confused!  Your business partner does in fact currently Qualify both licenses. The LLC license is current and Active (although that doesn’t help your situation).  The Corporate license is Suspended, however it’s not because of a Franchise Tax Board issue.  It is suspended because the Bond and the Worker’s Comp policy are both expired. There is a notation on the license stating that the Secretary of State status must be returned to “active” upon renewalof the license, but the license doesn’t expire until June 30th.  In order to get the Secretary of State back to active, you must satisfy the Franchise Tax Board, which typically means taxes weren’t filed, or they weren’t paid. But that’s not the issue currentlyholding up the license.

Business and Professions code 7031 states that an owner can withhold money if the contractor was not properly licensed at all times during the performance of the contract.

It sounds to me that your best course of action to collect your money is to contact your insurance company and ask that they re-instate the Bond and Worker’s Comp insurance, andthat they back date it retroactive to when they expired. That would be the only way to not show any gap in the license.  Good luck!