Corporate Transfers and LLC Bonds

As I have for many years, I will have a ‘bonding’ experience with a contractor in our first inquiry. First time or regular client, I always provide an answer on contractor and industry issues in licensing that reaches across the country. Wherever the question comes from we make a new friend. As readers are ‘aware’ the rules are complex, vary by state and are better understood before you ‘act’…

Q: We worked with you back in 2018 to obtain a license for our Corporation. We have converted our Corporation to a Limited Liability Company (LLC) and have notified the CSLB. In turn they have requested a bond that we aren’t familiar with, an LLC Employee/Worker bond. 

I’m sure you are aware it is required now that we are an LLC. Our question/concern is the bond application for this new bond seems to be asking a number of questions related to personal financial information. From our last experience working with you, the bond company never required such information, which seemed logical because we understood the bond to be in place so that we don’t need to prove financial security, the customers always know they can get recourse from the bond. Do you mind letting us know your thoughts as to the financial information on the bond application and whether that seems unusual to you? Thank you in advance.

A: Yes, it is normal. LLC’s require an LLC/Worker Bond not for the protection of consumers/customers, but rather for the Employees of the LLC to be protected. Because the structure of an LLC allows some protection to the owners personally, the CSLB wants to ensure the LLC’s employees will be protected and receive wages, benefits, etc in the case the LLC suffers any type of monetary damage. Due to the extra risk which can be associated with these Bonds, the Bonding companies require personal financial information and indemnity agreements.

Q: I had a quick question for you. We found the form “Request for License Number Reissuance” and may be interested in submitting it for our existing Corporation, if applicable, in order to dissolve the Corporation but keep the license number with a new Corporation. Is that the applicable form to use? Also, we wanted to know the difference between sole ownership licenses vs corporate licenses—does the CSLB require the same information for each?

A: Before you take action let me answer your first question, licenses are not transferrable from one corporation to another corporation. The license number re-issuance form can be used either for a Sole Owner re-issuing to a Corporation or LLC, or for a Corporation re-issuing to an LLC.

From a licensing perspective, the only real difference between a Sole Owner license and a Corporate license as far as the CSLB is concerned is that a Corporation is required to be registered with the Secretary of State. CSLB fees are slightly less for a Sole Owner license as well, initially and upon renewal every two years.