SOS Document Validity, Ownership Changes, Bonds and Business Purchase

Good news, bad news. In the complex rules of contracting taking one action may result in others not readily apparent without expert awareness of the links within the law. Another contractor discovers his appeal is just too late. I suggest two expert options for our last inquiry…

Q: We have a corporate license which is currently on Inactive status with the CSLB. We have been busy in other States and haven’t used our CA license for several years. We now have a large project coming up. I contacted the CSLB back in June and ordered a reactivation (for some reason, they don’t make this available on their website along with their other forms). 

I didn’t hear anything back after several weeks, but when I look up the license online there is a new notation which says, “this license is pending cancellation because the entity is no longer valid at the Secretary of State’s office”. In doing further digging after seeing this, apparently, we terminated the registration in CA since we weren’t doing business there. I then re-registered our Delaware LLC in CA so it’s active now. How do we cancel the pending license cancellation and get the license reactivated?

A: Bad news, you can’t cancel the pending license cancellation. Your Inactive license is tied to the now terminated entity. Because your LLC now has a new LLC registration number with the CA Secretary of State, you are required to apply for a new license. Your Qualifier does not need to re-test, but you’ll need to go through the application process, get new bonds in place, etc. Let me know if you would like our help with the process!

Q: When we originally obtained our contractor’s license back in 2015, the Qualifying Individual was the majority shareholder. He has since sold his shares and no longer has ownership in the Company. We failed to notify the CSLB when the ownership changed. Here we are eight months later! I called the CSLB, and they said we are required to have a Qualifier bond on record as soon as the Qualifier’s ownership has fallen below 10%. Do you know if there is a way to get a bond issued that is backdated to the first of the year?

A: It is my understanding that most bonding companies will only backdate a bond up to 90 days. You can do some shopping around, but I think that’s standard.

Q: I am interested in purchasing a contracting business, but I don’t have experience doing construction work. My original thought was the seller would remain on the license as the RMO/RME for a period of time until I gained the requisite experience. When I went to the SBA with this proposal, they said the bank will not approve an SBA loan where the seller is still employed by the Company. What are my options here?

A: You can hire someone else who has the requisite experience or has the appropriate qualification already. Perhaps the company being purchased has long-time employees which you can recruit for the purpose of becoming your Qualified Individual.