Category Archives: Contractors in California

The California Joint Venture License for Contractors Should Be Paired with a Written Joint Venture Agreement

Companies that lack the total expertise to bid on a local or State government contract in California can have the opportunity to bid under certain requests for solicitations and advertisements for bids.  Two or more companies can pair up to bid pursuant to a joint venture agreement, or even a teaming arrangement.

Typically the government customer will ask for a joint venture license prior to award of the contract as in this Alameda County bid advertisement.  What does a “joint venture license” mean?  This is a specific type of license issued by the California State Contractors License Board.  The CSLB indicates that, “[a] joint venture license may be issued to any combination of two or more licenses issued to sole proprietors, partnerships, corporations, limited liability companies, or other joint licenses”, and that “[t]he joint venture license may be issued in any classification held by at least one of the entities”.

As of the publication of this article the fee one must include with the application is $480.  Go here Applying for a Joint Venture License – Contractors State License Board for more information at the CSLB.

The license is not the only thing needed to make the “joint venture”.  Responsible companies will enter into a written joint venture agreement, usually drafted by legal counsel.   That agreement will specifically delineate who is responsible for what and how the arrangement will conclude.   Note that applying for the license does not mean you are properly set up as a joint venture as between the parties in the venture.

Be careful if one of the joint venturer contractors is suspended.  That affects the JV license.  California Business and Professions code states, “An active joint venture license shall be automatically suspended by operation of law during any period in which any member of the entity does not hold a current, active license in good standing.”  Cal. B&P C. sec. 7029.

This should not be taken as specific legal advice.  If you need legal advice specific to your situation or if you need a joint venture agreement drafted, please contact us by any means listed here.

Cross-Border Contracting–Nevada and California–CSLB Crackdown on 16 Contractors

Building contractors and subcontractors doing business on the border of Nevada and California have twice the burden as contractors operating only within one state.  This is particularly difficult for contractors operating in the South Lake Tahoe and Northwestern Nevada counties like Douglas, Carson City and Washoe.

For our readers’ interest we provide the latest press release from the California Contractors State License Board about their recent incursion into Nevada to prosecute alleged violators.

CSLB Press Release – 05/18/12

Second Annual Cal-Neva Border Blitz Nets 16 Phony Contractors

California, Nevada contractor boards hit underground economy on both sides of state line

SACRAMENTO — The California Contractors State License Board(CSLB) and Nevada State Contractors Board (NSCB) conducted their second annual simultaneous enforcement operation on May 16, 2012, sending 11 people to court in El Dorado County, California and five in Douglas County, Nevada, for contracting without a license and related violations of home improvement contracting law. The sting operations were conducted at a single family home in the Tallac Park area of South Lake Tahoe, California while the other was in a vacant business property at a Stateline, Nevada strip mall.

In both operations, investigators from CSLB’s Statewide Investigative Fraud Team (SWIFT) and the Nevada Board posed as property owners who were seeking bids for carpentry, painting, and landscaping. Some of the SWIFT investigators observed the Nevada operation, as did Nevada investigators at the California sting. Suspects who bid more than the legal limit for labor and materials were issued a notice to appear (NTA) in superior court.

It is against California law to contract for home improvement or construction jobs valued at $500 or more for labor and materials without a state-issued contractor license. In Nevada, it is illegal to contract for such jobs valued at more than $1,000. California law also requires licensees to place their license number in all forms of advertising. Those who work on jobs valued at less than $500 may advertise their services, but those ads must state that they are not a licensed contractor. Nevada prohibits anyone without a trade license to advertise for services. California and Nevada have a reciprocity agreement, which simplifies the application process for contractors licensed in one state who want to seek a license in the other.

Individuals on probation for theft and burglary were among those who bid on the Lake Tahoe area projects. Michael D. Abbey, who bid on a painting job at the California sting site, was on probation for theft. Eric James Brown, who bid on cabinetry work at the South Lake Tahoe house, was accompanied by Tyson McKenrick. DCA investigators transported McKenrick to jail for a probation violation on a prior burglary conviction.

“These simultaneous sting operations help maximize CSLB’s reciprocity agreement and the cooperation among our two state boards, giving our investigators the opportunity to join forces against those engaged in underground economic activity on both sides of the state line,” said CSLB Registrar Steve Sands. “It is important that those contracting for home improvement projects in both states comply with the laws of the state they are working in to protect consumers and law-abiding contractors.”

“The opportunity to join forces with California and combine our efforts to combat unlicensed contracting is a win-win for us all,” added NSCB Executive Officer Margi A. Grein. “We hope these events serve as a strong reminder that contracting without a license is not tolerated in either of our states, and that protecting the public from unscrupulous contractors continues to be our primary role and focus at the Board.”

Law enforcement backup was provided at the California sting site by the El Dorado County District Attorney’s Office and the Department of Consumer Affairs’ Division of Investigations.

The following suspects will be arraigned at the El Dorado County Superior Court’s South Lake Tahoe Branch, and will be contacted later about their future court date:

[Suspects’ names have been omitted from this post, although they do appear in the original CSLB release]

CSLB and NSCB urge consumers to follow these tips before signing a contract for home improvement work:

  • Only hire licensed contractors who hold a valid license in the state where the job will be done, and in the classification of the work to be undertaken.
  • Always check the license number on CSLB’s or NCSB’s website to make sure the contractor’s license is in good standing.
  • Don’t pay in cash, and don’t let payments get ahead of the work.
  • Get at least three bids, check references, and get a written contract.
  • Do not sign a contract until you completely understand all its terms.

The Contractors State License Board operates under the umbrella of the California Department of Consumer Affairs. More information and publications about hiring contractors are available on the CSLB website or by calling 800-321-CSLB (2752). You can also sign up for CSLB email alerts. CSLB licenses and regulates California’s 300,000 contractors, and is regarded as one of the leading consumer protection agencies in the United States. In fiscal year 2010-11, CSLB helped recover nearly $45 million in ordered restitution for consumers.

The Nevada State Contractors Board is committed to protecting the public’s health, safety, and welfare through licensing and regulation of the construction industry. Under Nevada Revised Statutes, a licensee is subject to disciplinary action by the Board for failure to comply with the requirements of the laws or regulations governing contractors. Violations may result in Board action against the contractor’s license. The State Contractors Board has the power to regulate contractors and discipline licensees who violate NRS 624. Disciplinary action may consist of a fine of up to $10,000 per offense, order corrective action, suspension, revocation or other action.

Link to original press release:  Second Annual Cal-Neva Border Blitz Nets 16 Phony Contractors

Contractors wishing to legally do business on both sides of the state line need to learn what the requirements are.  The costs are more than doubled to get appropriate licensing, but this is a cost of doing business in the border areas between two states.

If you have concerns, please contact us to schedule a phone appointment.

Minden contracting without a license  Gardnerville contracting without a license

Limited liability companies now authorized to hold California contractor’s license

CSLB Industry Bulletin – 01/27/2012

Contractors State License Board Issues First LLC License

SACRAMENTO -The California Contractors State License Board (CSLB) issued the first state contractor license to a limited liability company (LLC) on January 19, 2012, as part of the new business type that became eligible for licensure following the passage of Senate Bill 392 in 2010. The recipient is from the state of Washington: Doyon Project Services LLC, License No. 969358.

“To date, CSLB has received 36 LLC applications,” said CSLB Registrar Steve Sands. “However, our Licensing division has had to reject many because they were submitted without the correct information. We want to alert applicants to the errors we’re noticing so they can correct them before submitting incomplete application forms and causing a delay in their business operations.”

A common reason for rejection is the missing LLC registration number, which is issued by the California Secretary of State’s office (SOS). That number must be included on page one of the application. Companies should not submit the LLC application to CSLB until the SOS number has been issued.

Another common problem is that the personnel listed on the application do not match those reported by SOS. The same names and number of personnel listed on the application must match all of the personnel information provided to CSLB by SOS.

An issue related to the LLC personnel is that SOS has a four-month processing backlog for the Statement of Information (Form LLC-12) initial filings and updates, which are essential for reporting the LLC’s personnel (members and managers). CSLB cannot process the LLC license application until all information is consistent with SOS records. The personnel information is necessary for CSLB to determine the appropriate amount of required LLC liability insurance (between $1 million and $5 million, depending on the number of personnel).

Businesses that are planning to submit an LLC application to CSLB should plan for the four-month processing delay before submitting their application if they have recently submitted an initial or updated Statement of Information to SOS. However, SOS does offer expedited processing for an additional fee ($350 for 24-hour processing, and $750 for same-day processing—in by 9:30 a.m., out by 4:00 p.m.).

New Laws for California Contractors

Several new laws that took effect on January 1, 2012, may affect your business operations and employees.

  • LLC companies may now be licensed as contractors;
    certain types of misrepresentation of information in a mechanic’s lien voids the claim;
  • a new requirement for workers’ compensation insurers to notify CSLB if your policy is cancelled;
  • different penalties for not paying the general prevailing wage on a public works project (does not affect private works);
  • a new requirement to re-certify your workers’  compensation insurance exemption at the time of each license renewal;
  • requirements for notifying CSLB when a license qualifier disassociation takes place; and,
  • a new alert is sent to CSLB from the Labor and Workforce Development Agency when employees are misclassified as independent contractors.

Please contact our office or the Contractors State License Board if you have any questions about these changes.

 

Transferring California Contractor’s License from Individual Licensee to a Corporation Allowed Only if Licensee Owns 51% or More of Corp

If a 50% owner of a Nevada limited liability company (herein “LLC”) performing construction work in Nevada wants to obtain a California contractor’s license, can she simply take the California exam, get the license and then transfer the license to the LLC?  No, this will not work for two reasons.

First of all, the California State Contractors License Board does not license limited liability companies, foreign or otherwise.  It will only issue licenses to a sole proprietor, a partnership (also called a “copartnership”) or a corporation.  [Business & Professions Code section 7065].

Second, California law provides that no contractor’s license is transferable.  [Business & Professions code section 7075.1, subsection (a)].  By that it means licensees may not freely transfer, sell or assign their licenses to someone else without approval by the California State License Board.  However, under certain specific instances, upon application, the CSLB will reissue or reassign license numbers to certain people or entities.

When it comes to an individual wanting to have her license reissued to a corporation, the CSLB will only do it if the individual contractor licensee controls the corporation, i.e. control is having at least 51% of the ownership of the corporation.  [CSLB rules].  California law provides that the license may be reissued only if 1) the corporation is formed by an individual licensee and 2) the individual licensee maintains ownership directly or indirectly of shares evidencing more than 50 percent of the voting power.  [Business & Professions Code section 7075.1, subsection (c)(4)].  One can only assume that this law is in place to prevent investors from forming a corporation, and, essentially, “buying” a license by issuing only a limited number of shares of the company to an individual contractor licensee.

One solution to this is for the LLC to incorporate as a “C” corporation in their home state and qualify to do business with California’s Secretary of State, or to incorporate in California.  Then they may apply for a corporation contractor’s license with the California Secretary of State, and satisfy the new applicant rules.

An unlikely solution is for one of the owners of the LLC to buy out the other to the extent needed to achieve 51% or more ownership of the newly formed corporation.  The selling LLC owner would not likely do this.

For contractors seeking to do business in California, it is wise to seek legal counsel to help smooth the transition and avoid hassles with the California State License Contractors Board and the California Secretary of State.  Not doing the application correctly and not setting up the business entity in accordance with law can delay the process and cause the contractor to miss valuable bidding opportunities.