By Shauna Krause, President, Capitol Services, Inc.
Our first contractor learns to call it like it is, or a change in your ‘entity’ can later turn and bite! Another seeks an answer to satisfy a Vice President, whether he is Officer or Employee…
Q: My husband obtained his license back in 2010 as a Sole Proprietor. In 2017, he created a Limited Liability Company (LLC) and he added the name of the LLC as a ‘dba’ on the license. He also obtained the required bonding and insurance for the LLC.
We recently had a customer, who was unhappy because we filed a small claims against them for an unpaid invoice, and they filed a lawsuit against us claiming that my husband was unlicensed. Obviously, he’s a licensed contractor so at first, I thought there wasn’t any merit to it, but after reading into it, they are stating that he was unlicensed because his contracts reflect the business name with “LLC” at the end, but his license still reflects a Sole Proprietorship. Is this going to pose a problem?
Thank you for contacting Capitol Services. Yes, unfortunately, that will absolutely pose a problem if he has been operating as an LLC but his license reflects a Sole Proprietorship. You can apply to have the Sole Owner license transferred to a corporation or LLC, or you can obtain a separate license for the LLC, but regardless of which option you choose, the LLC needs to hold the license if you are operating as such. Even if you obtained the required bonds and insurance, they weren't on record with the CSLB without the LLC being licensed.
I know that's not the answer you wanted to hear, but California has a statute (7031) which states that if you aren't properly licensed while performing contracting work, you cannot recover any of the compensation for the work performed. Also, as part of 7031, a person who utilizes services of an "unlicensed" contractor may bring the contractor to court and recover any compensation paid.
Q: I read where all Officers of a corporation are required to be listed with the CSLB. Our Qualifying Individual who is a Responsible Managing Employee (RME) is actually a Vice President. Do we need to submit an application to change him to an RMO? And do we need to add our other VPs to the license also? We have many!
A: All Officers which are listed with the CA Secretary of State (SOS) are required to be listed on the license. Vice Presidents are not required to be listed with the SOS and therefore you don’t need to have them listed on the license. As far as your Qualifying Individual, he’s an employee with the title “Vice President”. So, it’s up to them whether they want to keep him as RME or change him to RMO, both are accurate. RMO’s have signing authority for the license so they can sign to make changes to the license, sign renewals, etc. Perhaps that will help you decide what you want his Qualifier title to be.
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 firstname.lastname@example.org, or write us at Capitol Services, Inc., 3609 Bradshaw Rd, Ste H, #343, Sacramento, CA 95827. Search past columns at www.cutredtape.com.