By Shauna Krause, President, Capitol Services, Inc.
Why the ‘buddy’ system doesn’t work for contractor’s licensing! Another ‘unlicensed’ inquiry that includes a ‘kickback’ in the answer…
Q: For many years I have been doing unlicensed construction, most of the work under $500. I have a corporation already set up. I have an opportunity to take a large home improvement contract but it would require me to get my license within two weeks which I know is next to impossible since I will need to take the exams and get fingerprinted. I have a buddy who has a Sole Owner license that he is not currently using. He said that I could use his license in order to take the job. Can I do that if I change the name on his license to reflect the name of my corporation?
A: We frequently talk with contractors who come up with all sorts of different scenarios in order to use someone else’s license. There is no loophole here. No matter how clever you are, there is no way for an unlicensed contractor to “share” a license and still be in compliance with the CSLB’s regulations. First of all, changing a business from a Sole Owner to a corporation is not as simple as changing the business name on the license; you are required to re-apply for the license. Secondly, it is still his license and you cannot do any work with that license number unless you are a bona fide employee of his company, in which case the work is still done under his company and not your corporation.
Q: We are a service company with a “B” (General Building) license. We contract with homeowners but we don’t actually perform the work; we sub-contract it out to licensed specialty contractors. We are planning to form a separate company that would act in a similar capacity and we are wondering if this new company will need a license. The new company will not actually sign contracts, but we would act as a construction manager, producing the plans, designing, and coordinating the project, and then set the homeowner up with our various subcontractors and they would contract with the homeowner directly. Our new company would in turn receive a percentage. Are we required to be licensed?
A: There are a couple things improper with the scenario you described. First of all, yes, you would be required to be licensed. B&P Code Section 7026.1 defines “Contractors” to include consultants who provide or oversee a bid for a construction project, arrange and set up work schedules for contractors, and maintain oversight of the construction project. Since the new company would be maintaining oversight of the projects, you will be required to obtain a license. Of course, an exception would be if the home improvement project is under $500.
Secondly, in our opinion, receiving a percentage of the contract essentially sounds like a referral fee or an inducement, which is prohibited by Section 7157 of the B&P Code.
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While knowledge is power, knowing where to go for the answers is half the battle. Get expert assistance immediately when you call 866-443-0657, email info@cutredtape.com, or write us at Capitol Services, Inc., 1225 8th St. Ste. 500, Sacramento, CA 95814. Research past columns at www.cutredtape.com.