By Shauna Krause, President, Capitol Services, Inc.
Changing your entity, as in the rush to LLC’s in recent years, and the ‘low’ down on transfers ‘in the family’ are even more reasons for an expert call. Despite our decades of assisting contractors and attorneys we all face an eternal learning curve when it comes to licensing regulations!...
Q: Hi Shauna, I’d like a bit more clarity from you on an item that came up on our call the other day regarding transferring our corporate license to a new LLC. You mentioned that my Partner and I will need to be a “manager” of the new LLC. Can you please explain further, including showing us the precise language in the license law? That term “manager” has multiple meanings and applications, especially within our legal entity structure (e.g., there can be a “manager” that’s an employee title or an officer title, there can be an LLC’s managing member, etc.).
A: To transfer a corporate license number to an LLC the personnel listed on the license for each entity must be the same (B&P Code Section 7075.1c(6)). The Secretary of State (SOS) requires that you list at least one member or manager of the LLC. LLC’s have members and/or managers. Typically, members have ownership, managers do not. LLC’s can elect to have officers as well. Being that a) you want to transfer the license number and therefore the personnel need to stay the same, and b) the Secretary of State requires that you list at least one member or manager, and c) the CSLB requires every individual listed with the SOS to be listed on the license, one or both of you is going to have to be listed as a Manager of the LLC.
Q: I have a low license number which was issued in 70’s and is a Sole Owner license. I was thinking about selling the license number and after doing some research, it looks like as a sole owner, the number can only be re-issued to a family member. Is it accurate that that’s my only option for selling the number? How loose are they with the reference to “family member”? Is a cousin considered a family member?
A: I’ll give you two options here. If you keep the license as a Sole Owner then your only option for transferring the number is to a family member. How “loose” the CSLB is with that term, I don’t think they are going to test bloodline or anything. You’ll just need to make a request in writing and state your relation to the individual and give permission for the transfer. The Statute in relation to these reads “…when the individual is an immediate family of a licensed individual who is deceased or absent and the license is required to continue an existing family contracting business”.
The second option is if you were to transfer the license to a corporation or LLC and then sell the business. That would allow you to sell it to a third party regardless of the relationship. You can give me a call discuss this option if you are interested.
***
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., 3609 Bradshaw Rd, Ste H, #343, Sacramento, CA 95827. Search past columns at www.cutredtape.com.