NV Financials Change and CA Qualifying Bonds

Bond, contractor’s Bond, not that secret agent guy. I ‘apply’ expertise in a couple of NV questions on finances for licensing, and share a big pat on the back for a recent change in the process there…

Q:  I am an attorney and you have always been helpful answering questions for me throughout the years regarding my Contractor clients.  I currently have a client who I am assisting with some complaints filed against their license.  When researching their license, I see the RME has a Bond of Qualified Individual in the amount of $12,500.  Shouldn’t this be $15,000?  Or did the CSLB lower the required amount?

A:  Prior to 2016, Contractor’s license Bonds and Bonds of Qualifying Individual were both required to be in the amount of $12,500.  In 2015, the California Governor signed a law to increase the Contractor’s license bond to $15,000, however the Bond of Qualified Individual has remained at $12,500.  

There are three types of bonds the CSLB requires of Contractors depending on their situation.  All licensed contractors are required to have a $15,000 Contractor’s bond.  Contractors with a Qualifying Individual owning less than 10% of the Business are required to have a $12,500 Bond of Qualified Individual.   Lastly, LLC’s holding a Contractor’s License are required to have (in addition to the $15k license bond) a $100,000 LLC/Worker bond.

Q:  In the Nevada Contractor’s License application, it States that a Financial Statement is required and it “must be for the applying entity”.  Our yearly Financial Statement is a combined Statement which includes one of our affiliated companies.  Will that suffice?  I read something about “indemnification” paperwork if the applying entity includes another entity’s Financial Statement so I’m wondering if Indemnification would be required.

A:  Yes, however if you want the NV Board to only consider your company’s Financial information as the applying entity, your Company will need to provide an internally prepared Balance Sheet for the same period as the Combined Financial.  If your Company wants/needs the NV Board to consider the affiliated company in addition to yours to qualify for a higher monetary limit, that’s when Indemnification would be necessary.

Q:  We started the process of obtaining a Nevada Contractor’s License with your help in May of 2020.  We had completed just about all of the paperwork and our only holdup was getting a reviewed Financial Statement.  Reviewed Financial Statements are very pricey, and with the uncertainty of the Pandemic, we were reluctant to spend the money with the possibility of not having any work.  The Contracting world has continued to be booming and we have lots of potential work coming up in Nevada, so thousands of dollars later, our CPA has prepared our Reviewed Financial Statement.  In looking at our paperwork from last year, our Bank Verification Form is dated July 2020.  I’m assuming we will need to get an updated form completed by the Bank?

A:  Actually, the Bank Verification form is no longer needed.  In the last few years, banks have continually been reluctant on filling them out and it became even worse when COVID hit.  Kudos to the NV Board for making a change to a longtime requirement realizing how cumbersome this task has become!  Plus, the Financial Statement that’s required verifies the bank information anyway.