By Shauna Krause, President, Capitol Services, Inc.
We assist contractors, industry officials and many attorneys that serve the construction world. These ‘lessons’ are best learned when someone else has the problem, before you become one. Keeping your CA contractor’s license up-to-date is the first rule. It’s often ‘lock, stock and barrel’ when buying a business, but what about using the existing contractor’s license? As businesses take advantage of the new LLC opportunity in CA there is also a new learning curve…
Q: My company would like to obtain a California contractor’s license, and we have an employee that we have brought on board that was previously licensed in CA to use as our Qualifying individual. He thought his license was ‘Inactive’ but come to find out it’s actually ‘Expired.’ Does the fact that he previously had a Sole Owner license provide him the opportunity to serve as the Qualifying individual on a company license at any time in the future? Or does an individual who lets their license expire find they are back at square one with the same status as someone who has never Qualified before?
A: The fact that an individual has been licensed in CA does not provide them the opportunity to serve as a Qualifying individual (RME/RMO) at any time in the future; the status of that license is definitely important. An individual who lets their license expire and goes for a period of more than five years without Qualifying a license does find themselves back at ‘square one’ with the application/testing process. They would be required to show their work experience again and re-take the exams. In order to prevent re-testing, the Qualifying individual would need to ensure that they keep their license on either Active or Inactive status.
Q: Hello, I am an attorney and my client currently has a California license (for the purpose of this conversation we’ll call it ABC Inc). If ABC Inc. purchases the assets of another existing licensee and wants to continue operating the existing licensee’s business, but under ABC Inc., could the license be amended to identify more than one dba name, or would they be required to obtain a separate license?
A: In an asset sale you cannot continue to operate under the same license number that the company currently has. When purchasing the assets of a licensed business, your client as the buyer will be transferring the assets to ABC Inc. and from that point can either obtain a new license for ABC Inc. with a dba name attached (which may be the current business name reflected on the seller’s license), or they can form a new entity, purchase the assets, and continue operating the business.
Q: We currently have a General Building Contractors license in CA for our Limited Liability Company (LLC) but we also frequently do specialty-plumbing work. We want to semi-separate this plumbing division so that we would be able to sign contracts for the plumbing work under a different license number. Is it easier to obtain a new license for our existing LLC with a dba name attached to reflect plumbing operations, or is it easier to create an entirely new LLC and obtain a license for that new entity?
A: Strictly from a licensing perspective, there are a few less steps that would be involved in obtaining the license for your existing LLC and then adding a dba. Your second scenario of forming an entirely new LLC would require registering that entity with the CA Secretary of State and filing a Statement of Information. You would also need to meet the Liability and Worker’s Comp insurance requirement in the name of the entity. With either scenario, new bonds would be required. Ultimately you should consult with your CPA or attorney when making this decision, as obviously the taxes/bookkeeping will affect your ultimate decision.
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. 580, Sacramento, CA 95814. Research past columns at www.cutredtape.com.
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