By Shauna Krause, President, Capitol Services, Inc.
Rumor; what the other guy thinks he knows; and information on the web can all be suspect when it comes to the facts on contractor’s law. The law and practices in forming LLC’s in California is one example. Another inquiry illustrates why looking for a ‘loophole’ isn’t the answer in going to work as a licensed contractor…
Q: I spoke to you over a year ago about obtaining a contractor’s license for a new Limited Liability Company (LLC). Due to all of the extra CSLB requirements I decided not to move forward with it. I am in a position now to satisfy those requirements so I started doing some research and according to some of the things I have read online, the process to obtain an LLC license can take many months. This is due to the fact that a Statement of Information must be filed with the Secretary of State, and from what I’ve read it is taking months for the Secretary of State to process the Statements of Information. Is this what you have found in your experience with helping LLC’s obtain their license?
A: It’s great to hear from you again. While the additional requirements for LLC’s have not changed since we last spoke, what you have found online with regards to the Secretary of State’s processing times is not entirely correct. It was the case for the first year and a half of the CSLB allowing LLC’s to obtain licenses, that the Secretary of State was backlogged and taking up to four months to process a Statement of Information. However several months ago the Statement of Information unit caught up and currently they are taking only about a week to file the Statement. That being said, most of the time the CSLB is processing LLC license applications just as quickly as corporations, sole proprietorships, etc.
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.
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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